on the Automatic Termination of Fixed-Term J GELDENHUYS ...

J GELDENHUYS PER / PELJ 2017 (20) 1

Abstract

A fixed-term contract terminates automatically by expiry after a

particular period, upon completion of a project, or the occurrence

of an event. The use of conditional employment arrangements is

accepted as a commercial reality. Awareness of the potential for

the abuse of "automatic termination" clauses in employment

contracts as a mechanism for termination is increasing. Recent

case law on the issue indicates that public policy, which serves

as the test for the validity and/or enforceability of "automatic

termination" clauses, has changed. The impetus for the

protection of "non-standard" or atypical employees is

underscored by policy considerations that have been

incorporated by the recent legislative amendments. These

developments may very well place a heavier evidentiary burden

than before on employers who opt to rely on "automatic

termination" clauses to sustain an argument in favour of their

validity and/or enforcement.

Keywords

Automatic termination; "automatic termination" clauses; contracting out of statutory protection; contractual waiver of rights; "fixed-term contract"; public policy; public interest; "non-standard" employees; resolutive conditions; temporary employment services; termination by operation of law; validity and enforceability of contractual devices.

……………………………………………………….

The Effect of Changing Public Policy

on the Automatic Termination of Fixed-Term

Employment Contracts in South Africa

J Geldenhuys*

Pioneer in peer-reviewed,

open access online law publications

Author

Judith Geldenhuys

Affiliation

UNISA, South Africa

Email [email protected]

Date published

26 June 2017

Editor Prof W Erlank

How to cite this article

Geldenhuys J "The Effect of Changing Public Policy on the Automatic Termination of Fixed-Term Employment Contracts in South Africa" PER / PELJ 2017(20) - DOI http://dx.doi.org/10.17159/1727-3781/2017/v20i0a1704

Copyright

.

DOI

http://dx.doi.org/10.17159/1727-3781/2017/v20i0a1704

http://journals.assaf.org.za/index.php/per/editor/submission/1160

http://journals.assaf.org.za/index.php/per/editor/submission/1160

https://creativecommons.org/licenses/by/4.0/


1 Introduction

Not all terminations of employment contracts constitute dismissals.1 It is

also possible for employment contracts to terminate by operation of law.2

Reliance upon "automatic termination" clauses3 is accepted as a means of

terminating fixed-term contracts.4 The termination of a fixed-term contract

upon the fulfilment of a resolutive condition is controversial. In certain

circumstances, the enforcement of an "automatic termination" clause can

be ruled as contrary to public policy, declared invalid, or not be enforced.5

The effect of automatic termination is that the affected employee/s would

have no access to remedies against the employer.6 When the employment

relationship terminates automatically, employers need not follow the

ordinary dismissal procedures, and the affected workers are deprived of the

right to receive notice and severance pay to which they may otherwise have

been entitled. Moreover, in practical terms they may be deterred from

* Judith Geldenhuys. LLB LLM (UP) LLD (UNISA). Senior Lecturer in the Department

of Mercantile Law, UNISA, South Africa. Email: [email protected]. 1 Notably, the conduct must fall within the definition of "dismissal" as contained in s

186(1) of the Labour Relations Act 66 of 1995 (the "LRA") before it would qualify as a dismissal.

2 These terminations are referred to as automatic terminations. Grogan Workplace Law 46. What qualifies as automatic termination is discussed further under 2.

3 In this contribution, "automatic termination" clause refers to a contractual clause that determines what the resolutive condition or term is by which a fixed-term employment contract will terminate automatically through operation of law or de jure. The Labour Appeal Court in Enforce Security Group v Fikile (DA24/15) 2017 ZALCD 2 (25 January 2017) used the term "automatic termination clause" similarly in this context. A time clause or term (a certain future event), or a condition (an uncertain future event) can be suspensive or resolutive, depending on the effect that it has on the contract. See Van Huyssteen et al Contract paras 9.155-9.156, 9.176-9.177 and De Wet and Yeats Kontraktereg en Handelsreg 133-138 for an explanation of the meaning and operation of suspensive and resolutive conditions and terms.

4 Policy makers are guided by the principle of regulated flexibility when drafting

legislation. Refer to Aletter and Van Eck 2016 SA Merc LJ 291, 292; Cheadle 2006

ILJ 663, 668; Van Eck 2014 IJCLLIR 49, 54-55. The permissibility of automatic

termination as means of the termination of fixed-term employment is discussed under

section 4. 5 For a contract to be valid, all that needs to be proven is that the agreement was

concluded freely and voluntarily. Barkhuizen v Napier 2007 5 SA 323 (CC) para 17. 6 Grogan Workplace Law 179. See also Potgieter v George Municipality 2011 32 ILJ

104 (WCC); Maritz v Cash Towing CC 2002 23 ILJ 1083 (CCMA) paras 14-15; Ndaba v Board of Trustees, Norwood Pre-school 1996 17 ILJ 504 (Tk) 509. In SATAWU obo Dube v Fidelity Supercare Cleaning Services Group (Pty) Ltd 2015 36 ILJ 1923 (LC) para 30 it was held that public sector employees also do not have to be afforded a hearing before the termination, and the termination of their services will not be subject to judicial review.


claiming unemployment benefits.7 Employers often abuse contractual

termination mechanisms. This is why courts have become sceptical of the

use of "automatic termination" clauses in contracts of employment.8

In establishing whether an "automatic termination" clause is valid and

enforceable courts must, among other things, consider whether the

employer included the provision in the contract, or relied upon it to evade

duties in terms of the Labour Relations Act 66 of 1995 as amended by the

Labour Relations Amendment Act 6 of 2014 ("the LRA").9 The main labour

legislation has been extended to protect the job security of "non-standard"

employees and to provide them with additional protection against abusive

practices.10 These amendments now inform the way in which the court

determines whether a termination of a fixed-term employee's employment

is an automatic termination or is instead a dismissal.11

In this contribution, case law is scrutinised to illustrate the development of

the jurisprudence in distinguishing between dismissals and automatic

terminations upon the fulfilment of a resolutive condition in terms of an

"automatic termination" clause in a fixed-term employment contract. The

different factors that the courts have considered in determining whether

"automatic termination" clauses are valid and/or enforceable are set out,

and practical examples are provided of how the different facets of public

policy have been employed. In the light of the extension of the statutory

protection mechanisms applicable to atypical employees,12 it is concluded

that the rationale for using contractual devices that detract from the job

security of vulnerable workers has become subject to more scrutiny. The

effect is that contractual "automatic termination" clauses which waive

7 The effects of the enforcement of automatic termination are elaborated on under

heading 6. 8 The courts are particularly concerned about automatic termination clauses in the

contracts of workers employed by labour brokers to perform temporary services. Grogan Workplace Law 171. The term "labour broker", which was first introduced in legislation in 1982, is commonly used in the South African context, even though "temporary employment services" has been the term used in the legislation since 1995. See Benjamin Law and Practice 1. Also see Aletter and Van Eck 2016 SA Merc LJ 287.

9 The factors that are considered in order to decide whether an "automatic termination" clause is valid and/or enforceable are discussed under 7.

10 The relevant amendments that have been affected by means of the Labour Relations Amendment Act 6 of 2014 are set out under 6, 7.

11 SATAWU obo Dube v Fidelity Supercare Cleaning Services Group (Pty) Ltd 2015 36 ILJ 1923 (LC).

12 The focus of the discussion is on the regulatory amendments as contained in the newly introduced Chapter IX of the LRA, which is entitled "Regulation of non-standard employment and general provisions".


certain rights will probably not so readily be considered valid and be

enforced as they have been in the past.

2 Not all terminations are dismissals

In order for a termination of employment to be actionable, it must qualify as

a "dismissal".13 An employment contract can be terminated in ways that

would not constitute a dismissal.14 A fixed-term contract can expire after a

particular period, after the completion of a project, or upon the occurrence

of an event.15 In such instances, the contract terminates automatically.16

Ordinarily it would not be a dismissal if a fixed-term contract terminates in

these instances. Nevertheless, the termination would remain subject to the

employee's right to fair dismissal as contained in section 186(1)(b).17 It could

still be a dismissal if the employer had created a reasonable expectation

that the employment relationship would continue beyond the term agreed

upon18 and the employment was, nevertheless, terminated, or if the

employer failed to make an offer of continued employment on the same or

similar terms.19 It has also been held at least once that if the fixed-term

contract of employment stipulates that after a specific time the employee

would become "permanent", the employer will not be allowed to rely on the

fact that the contract was one for a fixed-term to justify the termination of

the employee's employment.20 The three ways that the LRA recognises as

13 Section 186(1)(a) of the LRA defines "dismissal" as occurring in the event "that an

employer has terminated [the employees] employment with or without notice". 14 The LAC in Enforce Security Group v Fikile (DA24/15) 2017 ZALCD 2 (25 January

2017) considered s 186 of the LRA's wording (paras 17-18) and indicated that there are specifically defined instances that qualify as dismissals. Axiomatically, an employment contract can be terminated in a number of ways which do not constitute a dismissal as defined. One way is termination in accordance with a fixed-term employment contract concluded for a specific period or that is set to terminate upon the completion of a project, or the occurrence of a particular event. See also SATAWU obo Dube v Fidelity Supercare Cleaning Services Group (Pty) Ltd 2015 36 ILJ 1923 (LC) para 29.

15 Section 198B of the LRA. "Fixed-term contract" is defined in the LRA as a contract that terminates on the occurrence of a specified event, the completion of a specified task or project or on a fixed date other than an employee's normal or agreed retirement age.

16 Sindane v Prestige Cleaning Services 2010 31 ILJ 733 (LC) para 16. 17 Mahlamu v CCMA 2011 32 ILJ 1122 (LC) para 24. 18 Grogan describes the extension of s 186(1)(b) of the LRA to also cover fixed-term

employees having a reasonable expectation of being kept on indefinitely as a "direct legislative response" to University of Pretoria v CCMA 2012 33 ILJ 183 (LAC). Grogan Workplace Law 172 n 50.

19 Section 186(1)(b) of the LRA. 20 Solidarity obo Van Niekerk v Denel (Pty) Ltd (Denel Dynamics) 2012 10 BLLR 1030

(LC) paras 7-14. In this case, Van Niekerk J noted that despite the clear wording in terms of which she had been appointed in no fewer than eight fixed-term contracts,


methods of the automatic termination of fixed-term employment contracts

are elaborated on below.

2.1 Termination by the passage of time

When entering into a fixed-term contract of employment the employer and

employee agree that the employment relationship will last for a particular

time instead of indefinitely. The parties bind themselves for the duration of

the contract. The rationale is that the parties to the contract must plan their

lives based on the agreement, for the duration of the contract. Neither of the

parties can later avoid the consequences of having concluding the contract

for its duration, save where the other party is guilty of a material breach of

contract.21 Automatic termination is triggered in a case of this type of fixed-

term contract by a certain, future event – the lapse of the specific period that

is determined in the contract. In other words, the continuation of the

employment relationship is subject to a resolutive term.

the fact that they all included a clause indicating that after two years of employment she would be "obliged to convert to standard conditions of employment. Membership of the retirement scheme and the medical scheme will then be compulsory" meant that she became a permanent employee after two years. Also see Grogan Workplace Law 45.

21 Buthelezi v Municipal Demarcation Board 2004 25 ILJ 2317 (LAC) paras 9, 10. In

Buthelezi (para 20) the LAC reasoned that an employer is free not to enter into a fixed-

term contract, but to conclude a permanent contract instead if there is a risk that he or

she might have to terminate the employee's services before the expiry of the term.

The employee assumes the risk that during the term of the contract, he or she could

be offered a more lucrative job while he has an obligation to complete the contract

term. Both parties make a choice and there is no unfairness in that. Fixed-term

contracts, in terms of the common law and the LRA, cannot be terminated prematurely

without good cause, unless the fixed-term employee is paid out what he or she would

have been paid for the remainder of the agreed upon period. Meyers v Abrahamson

1952 3 SA 121 (C) 127 E; Abdullah v Kouga Municipality 2012 5 BLLR 425 (LC) paras

10-11. In Masetlha v President of the Republic of South Africa 2008 1 SA 566 (CC)

paras 62, 82 the court accepted that it was possible for a fixed-term contract to be

terminated before the agreed upon term had elapsed, or before its expiry if the

employee was guilty of a material breach of contract. Also see Grogan Workplace Law

44, 45. In limited circumstances, premature termination can be affected by mutual

agreement. A fixed-term contract can stipulate that the employment relationship can

be terminated by notice. See, for instance, Mafihla v Govan Mbeki Municipality 2005

26 ILJ 257 (LC) paras 40-42; Nkopane v Independent Electoral Commission 2007 28

ILJ 670 (LC); Morgan v Central University of Technology, Free State 2013 1 BLLR 52

(LC) para 5. The LAC has held that an employer can in such an event terminate the

contract prematurely by giving adequate notice. In this regard see Buthelezi v

Municipal Demarcation Board 2004 25 ILJ 2317 (LAC) para 9.


2.2 Termination on the completion of an agreed upon project

If the employer and employee agreed that the contract would terminate

upon the completion of a project, the employment relationship will terminate

automatically when the project is finalised. As the time when the project will

be finalised is uncertain, the completion of the project could be viewed as

constituting a resolutive condition. The LAC has accepted as a commercial

reality that employment contracts can include suspensive or resolutive

conditions. In the event of a suspensive condition there is no employment

contract pending the fulfilment of the suspensive condition.22 In a case of a

resolutive condition, a contract exists but it is terminated upon fulfilment of

the resolutive condition.23 The appellant's counsel in Nogcantsi v Mnquma

Local Municipality argued that suspensive conditions are permissible, but

that resolutive conditions in contracts of employment are not, and that this

distinction is important.24 The LAC correctly felt that the distinction is not

what is important, but that what matters is whether the condition prevents

the employee from exercising any right conferred by the LRA.25

If the automatic termination is triggered by the completion of a project, the

evidentiary burden rests on the employer to prove that the project was

completed.26 If the employer fails to prove this, the termination would be a

"dismissal" that is actionable under the LRA.27

22 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC) para 36; Palm 15

(Pty) Ltd v Cotton Tail Homes (Pty) Ltd 1978 2 SA 872 (A). 23 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC) para 36; Faith Hill

Holdings (Pty) Ltd v Sothiros 1976 4 SA 197 (T) 199D; Amoretti v Tuckers Land and Development Corporation (Pty) Ltd 1980 2 SA 330 (W).

24 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC) para 37. 25 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC) para 38. 26 Grogan Workplace Law 44. Likewise, the onus of proving consensual termination also

rests on the employer. In this regard see Springbok Trading (Pty) Ltd v Zondani 2004 25 ILJ 1681 (LAC); Kynoch Feeds (Pty) Ltd v CCMA 1998 19 ILJ 836 (LC) 849G-H; Ackrow v Northern Province Development Corporation 1998 9 BLLR 916 (LC) 920F-G. However, see Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC) para 33. The LAC held that the employee bore the onus of proving that a dismissal had occurred on a balance of probabilities, which he had in the LAC's view failed to do.

27 In Bottger v Ben Nomoyi Film and Video CC 1997 2 LLD 102 (CCMA) the employer failed to prove that the project for which the employees had been appointed was concluded and the CCMA commissioner ruled that the fixed-term employee had been unfairly retrenched. Also see Kelly Industrial Ltd v CCMA 2015 36 ILJ 1877 (LC) paras 61, 65. In that case the employment contracts distinguished between an "assignment" and a "project". Whereas the assignment may have been finalised, the project as defined in the contract had not been completed. Accordingly, the court held that the TES by relying on the "automatic termination" provision had impermissibly attempted to evade its obligations to the employees.


2.3 Termination upon the occurrence of an event

It is also possible to link the termination of a fixed-term appointment to the

occurrence of an event. The contract will then usually terminate

automatically when the event occurs or the resolutive condition is fulfilled. If

an "automatic termination" clause refers to an event, like the return of a

permanent employee after his or her leave of absence, it would not be a

dismissal if the employee's employment is terminated when the absent

permanent employee returns. This would not be one of the ordinary reasons

for dismissals. In other words, an "automatic termination" clause is

enforceable in instances where fixed-term contracts terminate upon the

occurrence of events that do not constitute an act by the employer.

Another example is that an "automatic termination" clause may include a

condition that the employee's employment will automatically and

simultaneously terminate when that person, or someone else, stops acting

in a specific position or capacity. In Potgieter v George Municipality28 the

termination of an associated appointment terminated the employee's

contract. The term of the fixed-term employment contract was linked to the

term of office of the person in the position of the executive mayor. Therefore,

when the executive mayor stopped performing that function, the fixed-term

employee's employment was terminated simultaneously. The court ruled

that this was an automatic termination and not a dismissal.29

However, as soon as a decision needs to be taken or passed in order to

trigger the "automatic termination" clause,30 the position changes. For

instance, in South African Post Office v Mampeule,31 Mampeule was

appointed for five years, subject to the condition that he had to remain an

executive director on the board. His contract of employment would, in terms

of the resolutive condition contained in the "automatic termination" clause,

terminate automatically and simultaneously if he ceased to hold office as an

executive director.32 In other words, the employee's employment was linked

to his holding of a position as an executive director of the company. When

the minister removed Mampeule as a director, he claimed to have been

unfairly dismissed.33 The trial court and appeal court both held that the

28 Potgieter v George Municipality 2011 32 ILJ 104 (WCC). 29 Potgieter v George Municipality 2011 32 ILJ 104 (WCC) para 48. 30 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 32 31 South African Post Office v Mampeule 2009 30 ILJ 664 (LC); South African Post Office

v Mampeule 2010 31 ILJ 2051 (LAC). 32 South African Post Office v Mampeule 2010 31 ILJ 2051 (LAC) paras 2, 16. 33 South African Post Office v Mampeule 2010 31 ILJ 2051 (LAC) para 3.


minister, by deciding to remove Mampeule, had dismissed him.34 In PG

Group (Pty) Ltd v Mbambo,35 the facts were similar: the employee's

employment was linked to his holding of a position as a director. Following

his removal from the board of the employer by the employer's holding

company, his employment terminated. The court again found that the

termination constituted a "dismissal".36

In Pecton Outsourcing, the "automatic termination" clause linked the

continuance of the fixed-term appointments of the workers to the service

contract between the TES and its client.37 The resolutive condition read that,

if the service contract between the TES and the client is cancelled, the

employment contract would terminate automatically, and that "[s]uch

termination shall not be construed as a retrenchment, but shall be a

completion of the contract".38 When the client terminated the entire service

agreement with the TES, the TES relied on the "automatic termination"

clause.39 A CCMA commissioner found that the employees had been

dismissed, and although the dismissals had been for a fair reason they had

been procedurally unfair.40 On review, the LC held that the commissioner

had erred in finding that the "automatic termination" clause was included as

an attempt to contract out of the process for fair retrenchment. However, the

judge agreed with the commissioner's finding that the "automatic

termination clause" was unenforceable, making the terminations a

dismissal.41

Recently the LAC in two decisions reached a different in conclusion. Enforce

Security Group v Fikile42 like Pecton involved a situation where an

employment agency or "service provider" employer placed workers with a

client. It had been agreed that the contract between the employer and the

client would terminate as soon as the service rendered by the workers were

no longer required. The client gave notice to the workers that their contracts

34 South African Post Office v Mampeule 2010 31 ILJ 2051 (LAC) paras 6, 13. 35 PG Group (Pty) Ltd v Mbambo 2005 1 BLLR 71 (LC); South African Post Office v

Mampeule 2010 31 ILJ 2051 (LAC) paras 38-41. 36 South African Post Office v Mampeule 2010 31 ILJ 2051 (LAC) paras 38-40. 37 This type of employment contract is called a "fixed-term eventuality contract" in

Enforce Security Group v Fikile (DA24/15) 2017 ZALCD 2 (25 January 2017). 38 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 3. 39 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 17. 40 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 12. 41 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 22.

Notably, because the dismissal was based on a mass retrenchment involving some 400 workers, the CCMA did not have jurisdiction to entertain the matter in any event, and it should have been referred to the Labour Court for adjudication on that basis.

42 Enforce Security Group v Fikile (DA24/15) 2017 ZALCD 2 (25 January 2017).


would terminate, because the event stipulated in the contract had taken

place. The commissioner in the CCMA ruled the termination as not

constituting a dismissal. The LC disagreed, holding that a dismissal had

occurred that was both substantively and procedurally unfair. On appeal,

the LAC concluded that the commissioner was correct that this was an

automatic termination, and not a dismissal as the termination of the

underlying contract between the client and the employer was the trigger of

the termination.

In Nogcantsi v Mnquma Local Municipality,43 the Municipality had

advertised two positions, and Nogcantsi had applied for one of them, a four-

year fixed-term position as a security officer. He was interviewed, after

which event he was offered and he accepted the post.44 The "automatic

termination" clause indicated that the appointment was subject to a vetting

and screening process and that, should negative aspects be revealed, the

contract would terminate automatically.45 On top of that, the contract

contained a clause providing for six months' probation, whereafter the

appointment would be confirmed if Nogcantsi's services were satisfactory.46

However, Nogcantsi failed to cross the first hurdle as the outcome of the

vetting exercise revealed negative information about him, and his

employment was terminated by the Municipality, relying on the "automatic

termination" clause.47 An arbitrator ruled that no dismissal had occurred and

the Labour Court and Labour Appeal Court agreed.48

Already it is apparent that despite the existence of similar factual

circumstances, the results in the court are not always the same. The courts

are often called upon to determine whether employers should be permitted

to rely on "automatic termination" clauses, or whether doing so would

unfairly deprive the affected employee of rights that he or she would

otherwise have. Some instances of patent abuse of these contractual

mechanisms are considered next.

43 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC). 44 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC) paras 3-4. 45 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC) para 5. 46 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC) para 6. 47 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC) para 7. 48 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC) paras 2-3, 15,

43-46.


3 Recognising the potential for abuse

In principle, employers and employees can conclude contracts on any terms

that are mutually acceptable to them.49 This opens the door to potential

abuse, particularly in a tripartite employment relationship, like the labour

brokerage scene, in which in principle it would be possible to terminate

employment without giving notice whenever the client pleases.50 In several

cases, employers have been absolved from scrutiny regarding the fairness

of the dismissal in instances where review would probably have been

appropriate. For instance, in April v Workforce Group Holdings (Pty) Limited

t/a The Workforce Group,51 the employment contract contained a provision

that the client could for whatever reason terminate the employee's services

without legal consequence. The TES terminated the worker's services after

the client informed it that the employee's services were no longer required.

A CCMA commissioner ruled that no dismissal had occurred, but that the

employment had terminated automatically. In Dladla v On-Time Labour Hire

CC,52 the client decided to terminate the employee's employment because

the employee had been arriving late to work. Instead of following the

appropriate dismissal procedures, the TES relied on the "automatic

termination" clause. This was also ruled to be an automatic termination and

not a dismissal. Likewise, in Sindane v Prestige Cleaning Services53 the

worker's employment contract was terminated after the client to which he

had been assigned indicated that his services were no longer required. The

LC concluded that no dismissal had occurred.

This may be why the jurisprudence in the last five years supports the notion

that a TES, to avoid possible liability for unfair dismissal in terms of the LRA,

must always follow the proper dismissal procedures when terminating

workers' employment. This appears to be the stance taken in Chokwe and

49 Paiges v Van Ryn Gold Mines Estates 1920 AD 600, 616. 50 No notice is required when the employment contract terminates upon completion of

an agreed upon task or if it had simply lapsed. Grogan Workplace Law 182; Theron 2003 ILJ 1247. Contracts between TES's and their employees often incorporate "automatic termination" clauses. Typically, these clauses provide that the contract between the TES and its employee terminates automatically if the TES's client no longer requires the services of the employee, for whatever reason. Bosch 2008 ILJ 813; Twoline Trading 413 (Pty) Ltd t/a Skosana Contract Labour v Abram Mongatane 2014 JOL 31668 (LC) para 60; Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 37; Mahlamu v CCMA 2011 32 ILJ 1122 (LC) para 14.

51 April v Workforce Group Holdings (Pty) Limited t/a The Workforce Group 2005 26 ILJ 2224 (CCMA).

52 Dladla v On-Time Labour Hire CC 2006 27 ILJ 216 (BCA). 53 Sindane v Prestige Cleaning Services 2010 31 ILJ 733 (LC) paras 4, 18-19.


Phetha Professional Services CC.54 The "automatic termination" clause

determined that the employee's appointment would last for twelve months,

subject to the "client's satisfaction and needs".55 The arbitrator noted that

this type of proviso is contrary to public policy, as its enforcement would

infringe the constitutional right to fair labour practices.56 In the result, the

premature termination of the fixed-term contract without consultation was

ruled an unfair dismissal.57

In Pecton Outsourcing Solutions CC and Pillemer B,58 the court held that

generally if the termination of the employment relationship is triggered by

an "event" and not by the employer's decision, no dismissal occurs. The

court found that in this particular case the employer, a TES, had not

performed an act of termination. Instead, the employment contracts

terminated when the underlying service contract between the TES and the

client was cancelled. Notwithstanding, Whitcher J found that, if the

automatic termination clause was ruled invalid or unenforceable as it was in

this case, the terminations would, nevertheless, constitute dismissals

affected by the TES, because the TES had a choice between following the

dismissal procedure, or invoking the automatic termination clause.59

In Mahlamu v CCMA60 the employee's employment contract included an

"automatic termination" clause containing a resolutive condition to the effect

that his employment would terminate upon expiry of the contact between

the employer and the client or if the client, for whatsoever reason, no longer

required his services.61 When the client advised the TES that a contract the

client had with the TES would end with immediate effect, the TES informed

Mahlamu that the contract had been cancelled, and that absent alternative

positions his services were no longer required. A CCMA commissioner

concluded that the contract had terminated automatically as the client no

longer required Mahlamu's services.62 On review, the LC set aside the

CCMA's ruling and declared that Mahlamu had been dismissed.63 In

Mahlamu, as in Pecton, invoking the "automatic termination" clause was

ruled the proximate cause of termination, as the TES had chosen to rely on

54 Chokwe and Phetha Professional Services CC 2010 31 ILJ 3041 (CCMA). 55 Chokwe and Phetha Professional Services CC 2010 31 ILJ 3041 (CCMA) para 24. 56 Chokwe and Phetha Professional Services CC 2010 31 ILJ 3041 (CCMA) para 26. 57 Chokwe and Phetha Professional Services CC 2010 31 ILJ 3041 (CCMA) paras 31,

34. 58 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC). 59 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) paras 21, 35. 60 Mahlamu v CCMA 2011 32 ILJ 1122 (LC). 61 Mahlamu v CCMA 2011 32 ILJ 1122 (LC) para 2. 62 Mahlamu v CCMA 2011 32 ILJ 1122 (LC) paras 4, 5. 63 Mahlamu v CCMA 2011 32 ILJ 1122 (LC) para 25.1.


it instead of following the dismissal procedure. In SATAWU obo Dube v

Fidelity Supercare Cleaning Services Group (Pty) Ltd,64 the court reiterated

that an act performed by a third party terminating a service agreement with

a labour broker cannot be the proximate cause of a "dismissal" in terms of

section 186(1) of the LRA.65 In other words, what the TES as employer does

or omits to do is viewed as the conduct terminating the employment

relationship, and not the decision made by the client.66

4 Reliance on "automatic termination" clauses is accepted

as a means of the termination of fixed-term employment

contracts

In South Africa and internationally "automatic termination" clauses that

determine that a fixed-term contract will simply expire or terminate upon the

completion of project or occurrence of an event are accepted as valid means

of terminating employment contracts.67 The ILO specifically provides that it

is possible for a fixed-term contract to terminate upon the occurrence of a

particular event, or upon the completion of a particular project.68 In other

words, the short answer as to whether it is permissible for employers to

include these types of clauses in an employment contract is an undeniable

yes. However, when scrutinising the divergent views of the court in different

cases, it becomes apparent that the situation is less clear-cut.

When considering whether the use of a specific "automatic termination"

clause should be permitted, the South Africa court often relies on the

judgment by the UK Court of Appeal in Igbo v Johnson Matthey Chemicals

Ltd.69 Igbo concerned the enforceability of "automatic termination" clauses,

64 SATAWU obo Dube v Fidelity Supercare Service Group (Pty) Ltd 2015 36 ILJ 1923

(LC) paras 32-34. 65 Sindane v Prestige Cleaning Services 2010 31 ILJ 733 (LC) para 16. 66 However, compare Enforce Security Group v Fikile (DA24/15) 2017 ZALCD 2 (25

January 2017). The LAC in this case held (para 24) that the fact that the employer could retrench the employees or could have considered other options instead of relying on the automatic termination clause cannot be used to negate the clear terms agreed to by the parties. The considerations of the fairness or otherwise of a dismissal does not come into play in the process of determining whether or not a dismissal had occurred.

67 Section 198B of the LRA defines "fixed-term contract" as a contract terminating upon the agreed-upon date which is not the ordinary retirement date, the completion of a project or task, or on the happening of an event described in the contract.

68 Article 2(a) of the ILO Convention 158 of 1982 on the Termination of Employment. 69 Igbo v Johnson Matthey Chemicals Ltd 1986 IRLR 215 (CA). See, for instance,

Mahlamu v CCMA 2011 32 ILJ 1122 (LC); South African Post Office v Mampeule 2009 30 ILJ 664 (LC). Although Igbo concerned an employee's rights before and after a contractual amendment, it establishes relevant principles.


and the scope of protection offered to employees by the legislation.70 The

facts were: the employee wanted to go on extended vacation leave. The

employer and employee entered into an agreement that if the employee

should fail to return to work on a particular day, the contract of employment

would terminate automatically. When the employee failed to return to work

on the specified day, the employer took it as meaning that the resolutive

condition had been fulfilled and the employment contract had terminated

automatically. In the application for a declaratory order, the trial court having

referred to British Leyland (UK) Ltd v Ashraf71 concluded that the

consensual agreement terminated the employee's employment. On appeal,

the EAT agreed with the finding of the court below, and dismissed the

employee's appeal. In a further appeal, the Court of Appeal overturned the

findings of both of the lower courts, and overruled the judgment in Ashraf.72

The court declared that the employee had been dismissed, and that the

"automatic termination" clause was void.73 The Court of Appeal held that the

"automatic termination" clause had the effect that if the employee failed to

return to work on the specified day, the employee's right to refer a dispute

based on unfair dismissal would be excluded or restricted. This meant that

enforcing the clause would render the right not to be unfairly dismissed

conditional.74 The court rejected the employer's argument that the

termination of employment had been consensual on the basis that the object

of the legislation could then easily be defeated. Employers could easily

include clauses that would circumvent the statutory protection.75

70 The court in Igbo considered ss 5, 54 and 55 of the Employment Protection

(Consolidation) Act 1978 ("the EPA"). S 54(1) of the EPA is similar to s 185 of the LRA. It determines that "every employee shall have the right not to be unfairly dismissed by his employer". S 55(2)(a) of the EPA like s 186(1)(a) of the LRA determines that an employee is dismissed if his or her employment contract is "terminated by notice or without notice". S 140 of the EPA is very similar to s 5 of the LRA. It provides that "(1) Except as provided by the following provisions of this section, any provision in an agreement (whether a contract of employment or not) shall be void in so far as it purports– (a) to exclude or limit the operation of any provision of this Act; or (b) to preclude any person from presenting a complaint to, or bringing any proceedings under this Act before, an industrial tribunal". Mahlamu v CCMA 2011 32 ILJ 1122 (LC) para 16.

71 British Leyland (UK) Ltd v Ashraf 1978 IRLR 930 (EAT). 72 Igbo v Johnson Matthey Chemicals Ltd 1986 IRLR 215 (CA) para 19; Mahlamu v

CCMA 2011 32 ILJ 1122 (LC) para 17. 73 Mahlamu v CCMA 2011 32 ILJ 1122 (LC) para 15. 74 Igbo v Johnson Matthey Chemicals Ltd 1986 IRLR 215 (CA) paras 19, 21; South

African Post Office v Mampeule 2009 30 ILJ 664 (LC) para 36; Mahlamu v CCMA 2011 32 ILJ 1122 (LC) para 17.

75 Igbo v Johnson Matthey Chemicals Ltd 1986 IRLR 215 (CA) para 17; Mahlamu v CCMA 2011 32 ILJ 1122 (LC) para 17.


In Mahlamu v CCMA,76 a South African case, the employment contract

determined that, if the client of the TES no longer required the services of

the employee, or no longer wished to deal with that employee, the contract

would terminate automatically.77 The LC held that a contractual stipulation

having the effect of making the termination of employment something other

than a dismissal so that the employee is left unable to challenge the fairness

of the termination in terms of the LRA is prohibited.78 If the contract is set to

terminate upon the occurrence of an event, usually it would not be a

dismissal if the agreed upon event materialises and the employment

terminates. The employee could in those instances still rely upon section

186(1)(b) of the LRA if the employer fails to renew, or offers to renew a fixed-

term contract on less favourable terms and the employee reasonably

expected the employment relationship to continue. The right not to be

unfairly dismissed is not rendered conditional. The court in Mahlamu79 noted

that it would be unwise to attempt to crystallise all of the instances in which

the right to a fair dismissal would be converted into a conditional right.

However, two examples were mentioned: if the contract would terminate

automatically upon "a defined act of misconduct or incapacity", or if "a

decision by a third party" has the result of terminating the employment it

would render the right not to be unfairly dismissed conditional, which is

impermissible.80 Likewise, in Pecton Outsourcing Solutions CC and Pillemer

B81 the court, despite the acceptance of this mechanism as a means of

terminating employment relationships, held that an "automatic termination"

clause must not attempt to make it impossible for the employee to exercise

his or her rights under the LRA. This, the court held, is what is meant by

"contracting out", which is prohibited in the LRA.82 In Nogcantsi v Mnquma

Local Municipality,83 the LAC with reference to SA Post Office v Mampeule

and Mahlamu the court held that the condition in the present instance was

acceptable. The court reasoned that making an appointment or continued

employment conditional on a positive vetting and screening exercise was

justified, given the nature of the work. Moreover, providing that the contract

will terminate automatically if the result of the vetting is negative did not

deprive an employee of the right to security of employment, because it was

76 Mahlamu v CCMA 2011 32 ILJ 1122 (LC). 77 Mahlamu v CCMA 2011 32 ILJ 1122 (LC) para 2. 78 Mahlamu v CCMA 2011 32 ILJ 1122 (LC) para 22; Pecton Outsourcing Solutions CC

and Pillemer B 2016 37 ILJ 693 (LC) para 28. 79 Mahlamu v CCMA 2011 32 ILJ 1122 (LC). 80 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 26. 81 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC). 82 Section 5 of the LRA. 83 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC).


not aware of any cases in which such a requirement had the effect of

diminishing an employee's job security.84

It is clear that despite the acknowledgement that it is possible for fixed-term

employment relationships to terminate automatically, the wording of

"automatic termination" clauses and the motivation for reliance upon them

play a significant role in determining whether the termination was indeed an

automatic termination or a dismissal instead. Even though "automatic

termination" clauses are in principle accepted as a way of terminating fixed-

term employment contracts, it remains possible for the contractual clauses

to be ruled invalid and/or unenforceable. This aspect is considered next.

5 Is the contract invalid or unenforceable, or both?

Fixed-term employees are more exposed to abuse than are permanent

employees. It is easier for employers to find loopholes in fixed-term

employment relationships that allow them to "contract out" of certain rights.

This is why labour forums scrutinise "automatic termination" clauses

carefully to ensure that the rights in the LRA are not denied by cleverly

worded contractual clauses.85 Notably, the court has on several occasions

held that it will not consider as conclusive proof of a waiver of the dismissal

protection a contractual term in a fixed-term employment contract to the

effect that the employee agrees that he or she will not have a reasonable

expectation of continuation of employment.86

If a contractual stipulation is contrary to public policy, it is unenforceable. A

contractual clause which is found to be inimical to the Constitution of the

Republic of South Africa, 1996 ("the Constitution") would, for instance, be

contrary to public policy, and unenforceable for that reason.87 If the

termination clause is worded in a way which renders it contrary to public

84 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC) paras 15, 21-24. 85 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 23. 86 Basson J in Vorster v Rednave Enterprises CC t/a Cash Converters Queenswood

2009 30 ILJ 407 (LC) 418I-19B held that, despite the inclusion of a clause excluding

the possibility of a reasonable expectation, the facts of the case must be considered

to determine whether a reasonable expectation as envisaged in s 186(1)(b) of the LRA

had been created. This principle was confirmed in SA Rugby (Pty) Ltd v CCMA 2006

27 ILJ 1041 (LC) para 13. In Mediterranean Woollen Mills (Pty) Ltd v SACTWU 1998

19 ILJ 731 (SCA) 733-734 the LC held that despite the inclusion of a clause excluding

an expectation of a reasonable expectation, a reasonable expectation could arise that

the fixed-term contract will be renewed either temporarily or indefinitely.

87 Barkhuizen v Napier 2007 5 SA 323 (CC) paras 29-30.


policy, an employer would be unable to rely on it as a reason and procedure

for the termination of the employment relationship.88

A contractual clause that is contrary to the Constitution would be invalid if

its contents constituted a law of general application for the purposes of

section 36 of the Constitution, and "law or conduct" capable of being

declared invalid for the purposes of section 172(1)(a) of the Constitution,

which an "automatic termination" clause is not.89 Therefore, declaring an

"automatic termination" clause unconstitutional would render it

unenforceable, not invalid.90

Arguably, an "automatic termination" clause could be declared invalid by

other means. In South African Post Office v Mampeule91 both the validity

and enforceability of the "automatic termination" clause were attacked. It

was submitted that the clause constituted an impermissible limitation

on statutory rights in the employment contract. The employee argued

that the provision "vitally limited" the dismissal protection, because the

right not to be unfairly dismissed would be subject to the condition that

the employee retained his position as director. It was also argued that

the clause was unconstitutional, contrary to public policy and

unenforceable. Moreover, it was argued that because the "automatic

termination" clause conflicted with the LRA it stood to be set aside in

terms of section 210 of the LRA.92 Unfortunately, the LAC found it

unnecessary to consider the issue of the constitutionality of the "automatic

88 Bhorat and Cheadle Labour Reform 23. The termination of employment will then

constitute a dismissal. The employer, having relied upon the automatic termination clause, at the very least, would not have followed a fair procedure in terminating the employment. Consequently, the dismissal would usually also be ruled unfair. In some instances, the dismissal could nevertheless be fair. Compare SATAWU obo Dube v Fidelity Supercare Service Group (Pty) Ltd 2015 36 ILJ 1923 (LC) paras 25, 26. At paras 62-66 the court held that there had been a dismissal for operational reasons, but that despite the reliance upon the "automatic termination" clause, the dismissal was not unfair. The employer had consulted with the affected employee on several occasions and tried to get her to apply for a position, but the employee declined this offer and indicated that she would claim disability instead, with which the employer had also assisted her.

89 Barkhuizen v Napier 2007 5 SA 323 (CC) paras 19, 20, 23, 24. 90 Barkhuizen v Napier 2007 5 SA 323 (CC) paras 8, 10. In the High Court, the applicant

did not argue that the contractual clause was contrary to the public policy. Instead, the

case was framed around the unconstitutionality based on s 34 of the Constitution. The

High Court declared the contractual clause invalid based on pacta sunt servanda. The

reason why the contractual clause was not declared unconstitutional in itself was that

the clause was not a law of general application as required in s 36 of the Constitution. 91 South African Post Office v Mampeule 2010 31 ILJ 2051 (LAC). 92 South African Post Office v Mampeule 2010 31 ILJ 2051 (LAC) para 11.


termination" clause because it agreed with the court below, and also

declined to make a finding concerning the standing of the clause in the light of

section 210 of the LRA.93 In Nogcantsi v Mnquma Local Municipality94

Nogcantsi's legal representative claimed that the "automatic termination"

clause in his case was invalid in terms of section 5(2)(b) read with 5(4) of

the LRA. Allegedly, it denied him the opportunity of making representations,

or in the alternative it was alleged that the clause was void for vagueness,

because no objective basis was provided to determine whether the outcome

of the vetting was "negative". Unfortunately, the LAC, rejecting the first claim

and surmising that the clause was clear enough, did not consider the

alternative plea of invalidity based on vagueness.95

The relevant provision which is generally applied in terms of the LRA to

declare an "automatic termination" clause invalid or unenforceable is

considered below.

6 Contracting out or avoiding the application of statutory

protection by relying on "automatic termination" clauses

That unscrupulous employers would attempt to avoid their obligations in

terms of the LRA was anticipated. That is why section 5 was included in the

LRA to prevent contracting out of the rights conferred by the LRA.96 The

relevant excerpts of this section read

(2) Without limiting the general protection conferred by subsection (1), no

person may do, or threaten to do, any of the following- …

(b) prevent an employee or a person seeking employment from

exercising any right conferred by this Act or from participating

in any proceedings in terms of this Act …

(4) A provision in any contract, whether entered into before or after the commencement of this Act, that directly or indirectly contradicts or limits any provision of section 4, or this section, is invalid, unless the contractual provision is permitted by this Act.97

Generally, the court accepts that it is impermissible for employers to include

in an employment contract a stipulation that makes the duration of an

employment relationship dependent on an action to be performed by the

employee in relation to his or her conduct, capacity or the employer or

93 South African Post Office v Mampeule 2010 31 ILJ 2051 (LAC) para 24. 94 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC) paras 25-27. 95 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC) paras 25-27. 96 Notably, this provision was included in the LRA before the recent labour law reform. 97 Section 5 of the LRA.


client's operational requirements.98 This would constitute a dismissal.99 If for

instance the contract determines that the fixed-term employee's

employment will terminate automatically if the employee is guilty of

misconduct, if the labour broker or the client takes an operational decision,

or if the employee fails to meet a specified performance standard, the

contractual clause100 will be ruled to be of no legal force. This would clearly

deprive employees of their statutory rights in terms of the LRA and the

Constitution.

Unfortunately, employers often do not understand what is meant by the

prohibition against contracting out, or they choose to ignore it. For instance,

in Pecton Outsourcing Solutions CC and Pillemer B,101 the employer argued

that a TES is free to contract out of the provisions related to notice and

severance pay.102 Likewise, Kelly Industrial argued that a TES could simply

lay off workers without that constituting a "dismissal" if the client no longer

required them.103 The question is whether these views that the right to be

fairly dismissed, to receive notice of termination and severance pay can be

waived by agreement are correct. The different rights that fixed-term

employees are entitled to, but which are often considered as having been

waived by signing a fixed-term contract, and which are negatively affected

by the enforcement of "automatic termination" clauses, are scrutinised more

closely below.

98 South African Post Office Ltd v Mampeule 2010 30 ILJ 664 (LC); South African Post

Office Ltd v Mampeule 2010 31 ILJ 2051 (LAC); Mahlamu v CCMA 2011 32 ILJ 1122 (LC). In Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC) the court distinguished SA Post Office v Mampeule and Mahlamu v CCMA in which it had been found that in terms of s 5(2)(b) and 5(4) of the LRA, parties to an employment contract cannot contract out of the protection afforded in terms of the LRA against unfair dismissal, because the condition set in this case was not one that was impermissible under the LRA (para 20). As for Mampeule, the LC held that there the Minister was aware that his action would trigger the termination, which was not the case in Nogcantsi, where he was required to undergo a vetting and come out clean on the other side (paras 23-24).

99 Grogan Workplace Law 44. 100 The contractual principle of severability dictates that only the parts of a contract that

are considered contrary to public policy can be declared unenforceable. See Christie

and Bradfield Law of Contract 381. 101 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC). 102 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 18.

Notably, the right to notice and severance pay and the right to unemployment benefits are not covered by the LRA but by other pieces of legislation. Therefore, it would be misplaced to argue that these provisions are also subject to s 5 of the LRA.

103 Kelly Industrial Ltd v CCMA 2015 36 ILJ 1877 (LC) para 65.


6.1 Waiver of the right to receive severance pay

A fixed-term employee that is dismissed for operational reasons,104 who had

been employed for longer than twelve months, even before the

amendments, would have been entitled to severance pay.105 Only if that

fixed-term employee refuses reasonable alternative employment offered to

him or her by the employer would he or she forfeit the severance pay.106

The LRA states that severance pay is additional to any other payment due

to the employee.107 In Bronn v University of Cape Town108 the court found

that severance pay is a social security mechanism which is intended to aid

workers whose services are terminated due to no fault of their own.109

Nevertheless, in practice fixed-term employees often have been denied

severance payment. Before the amendments, the labour tribunals did not

enforce the payment of severance pay to fixed-term employees even when

a dismissal for operational reasons was ruled unfair.110 For instance, in

Nkopane v IEC111 Kennedy AJ held that severance pay that the employer

had paid the affected fixed-term employee on termination had to be

subtracted from the subsequent compensation awarded for unfair

dismissal.112 Apparently, despite the fact that fixed-term employees would

104 In s 213 of the LRA "operational requirements" are described as the needs of

employers based on "economic, technological, structural or similar" motivations. 105 Section 41 of the Basic Conditions of Employment Act 75 of 1997 (the "BCEA"). The

minister may adjust this rate from time to time after consultation with NEDLAC and the Public Service Coordinating Bargaining Council. Contracts of employment and collective agreements may provide for higher levels of redundancy pay.

106 Section 41(4) of the BCEA determines that an employee who unreasonably refuses an offer of alternative employment forfeits his or her right to severance pay. Also see item 11 of the Code of Good Practice on Dismissal based on Operational Requirements (GN 1517 in GG 20254 of 16 July 1999). The reasonableness of a refusal is determined by a consideration of the reasonableness of the offer of alternative employment. Objective factors like remuneration, status, job security and the employee's personal circumstances are considered.

107 Section 196 of the LRA. However, an employee would not be entitled to a severance payment despite the fact that he or she is dismissed for operational reasons if the employer is exempted from paying severance pay, or if the employer had offered other reasonable alternative employment which was refused.

108 Bronn v University of Cape Town 1999 20 ILJ 951 (CCMA). De Villiers 2010 SA Merc LJ 117-118, 120.

109 Bronn v University of Cape Town 1999 20 ILJ 951 (CCMA) 952H-J. 110 De Villiers 2010 SA Merc LJ 120. Also see Khumalo v Supercare Cleaning 2000 8

BALR 892 (CCMA) 897D-F. In this case the arbitrator noted that employees appointed on fixed-term contracts whose employment was conditional upon the continuation of a contract between the employer and its client were not dismissed and consequently not entitled to severance pay upon cancellation of their contracts; SACCAWU obo Makubalo v Pro-Cut Fruit and Veg 2002 5 BALR 543 (CCMA) 545E.

111 Nkopane v Independent Electoral Commission 2007 28 ILJ 670 (LC). 112 Nkopane v Independent Electoral Commission 2007 28 ILJ 670 (LC) para 80. Notably,

in the UK, redundancy payments received after the termination of a fixed-term employee's employment would be subtracted from the compensation for unfair


be entitled to severance pay, employers and labour forums often did not

apply the severance pay principles to fixed-term employees in the same way

as for indefinitely appointed employees. This view is bolstered by the fact

that in the recent LAC judgment the employees contested being appointed

on fixed-term contracts so that they would be in a position to claim a proper

retrenchment process under section 189 of the LRA and be eligible to be

paid severance pay.113

6.2 Waiver of the right to receive notice of termination

All employees, including fixed-term employees, are entitled to reasonable

notice of termination of their employment.114 However, it is well accepted

that absent a stipulation providing for the possibility of terminating the

contract by notice, or if the fixed-term contract is renewable,115 an employer

can rely on the termination date in a fixed-term contract without giving

notice.116

6.3 "Waiver" of unemployment benefits

Although the Unemployment Insurance Act 63 of 2001 provides for the

payment of unemployment benefits to all employees,117 and fixed-term

employees can claim unemployment benefits if their contracts are

terminated,118 it has been held that a fixed-term employee who reasonably

expects to continue working for an employer would not claim unemployment

insurance.119 This finding by a bargaining council arbitrator cannot be

dismissal only if adding them would mean that the basic award would be exceeded, if the employee's conduct had contributed to the termination, or if the employee had failed to take steps to mitigate his or her losses. Refer to s 123(3) of the Employment Rights Act 1996.

113 Enforce Security Group v Fikile (DA24/15) 2017 ZALCD 2 (25 January 2017) paras 6, 14.

114 Sections 37 and 38 of the BCEA. The notice period for fixed-term employees

employed for longer than a year may be reduced to two weeks by means of a collective

agreement. It is also possible to pay an employee in lieu of notice. Also see SATAWU

obo Dube v Fidelity Supercare Cleaning Services Group (Pty) Ltd 2015 36 ILJ 1923

(LC) para 37. 115 Mafihla v Govan Mbeki Municipality 2005 26 ILJ 257 (LC) para 37. It is possible to

include a notice period in a fixed-term contract. This agreement is called a "maximum duration contract".

116 Gericke 2011 PELJ 116; Olivier 1996 ILJ 1013-1014. 117 Section 4 of the Unemployment Insurance Act 63 of 2001 establishes a fund to which

employers and employees contribute. 118 Section 16(1)(a) of the Unemployment Insurance Act 63 of 2001; ss 5, 8 of the

Unemployment Contribution Act 4 of 2002. 119 Hlatswayo and KwaDukuza Municipality 2012 33 ILJ 2721 (BCA) para 5.2.11. The

employee was eligible to claim unemployment payments, but had failed to do so. This


viewed as setting a precedent that signing a fixed-term contract amounts to

a contractual waiver of the statutory right to receive unemployment

insurance fund payments. However, it serves to illustrate how the

conclusion of a fixed-term contract can negate the dismissal protection

afforded to fixed-term employees.

The discussion so far makes it clear that "automatic termination" clauses,

despite generally being accepted as mechanisms for the termination of

fixed-term employment, are contentious. Next, the focus turns to the method

used by the court and the factors that are considered in determining whether

an "automatic termination" clause is valid and/or enforceable.

7 How the courts determine if an "automatic termination"

clause is valid and enforceable

The procedure used by the court in establishing whether or not an employer

should be permitted to rely on such a clause warrants further scrutiny. The

first test is to determine what actually caused the termination. This test is

considered below.

7.1 The proximate cause test

The first step is to determine if a "dismissal" occurred, because otherwise

the CCMA or bargaining council would lack jurisdiction to entertain the

dispute.120 The proximate cause test is used to determine whether a

dismissal had occurred in instances in which the employer relied on an

"automatic termination" clause.121 The principles of factual and legal

causation play a role in determining what the proximate cause of termination

of the employment relationship is.122 Automatic terminations would usually

not constitute a dismissal, because the termination would not have "been

occasioned by an act of the employer".123 To prove that a dismissal

was considered as indicative of the fact that the employee had expected that his employment would continue.

120 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC) para 34; Enforce Security Group v Fikile (DA24/15) 2017 ZALCD 2 (25 January 2017) paras 42-46.

121 South African Post Office v Mampeule 2010 31 ILJ 2051 (LAC) paras 8, 16, 43; Pecton

Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 17. 122 South African Post Office v Mampeule 2010 31 ILJ 2051 (LAC) para 8. 123 Grogan Workplace Law 182. Also see Sindane v Prestige Cleaning Services 2010 31

ILJ 733 (LC) para 16. The court accepted that in automatic terminations, an

employment contract is terminated, "in ways other than the employer undertaking

some action that leads to the termination" and Pecton Outsourcing Solutions CC and

Pillemer B 2016 37 ILJ 693 (LC) para 19.


occurred, the employer's conduct must have been the proximate cause of

the termination.124 A clear, unilateral and unequivocal act by the employer

is required that shows the intention not to continue with the employment

relationship.125 The Labour Appeal Court in Nogcantsi v Mnquma Local

Municipality qualified this requirement further by holding that the employer's

act must have been "deliberate" or "intentional" and directed at causing a

dismissal.126

In Commercial Union Assurance Co of South Africa Ltd v KwaZulu Finance

and Investment Corporation,127 the court stated that the event that had

occurred latest in time is not necessarily the effective cause of

termination.128 An act that may seem remote to the result may be the

effective cause.129 For instance, if a fishing trawler is lost after being

arrested when the owners failed to pay the fine to release it, the proximate

or effective cause of the loss is not confiscation of the trawler but the failure

to pay the fine.130

What the effective cause of a termination is must be ascertained on a case-

by-case basis. A small difference in the facts can change the outcome.

NULAW v Barnard131 serves as an example. In NULAW, the shareholders

had passed a special resolution for the company's voluntary winding-up.

Consequently, all the workers' employment contracts were terminated

because of the insolvency of the company. The question was whether the

insolvency terminated the contracts, or whether the passing of the resolution

to wind up the company was the proximate cause. In SA Post Office Ltd v

Mampeule,132 Davis JA with reference to NULAW held that it was the special

124 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 19. 125 Grogan Workplace Law 165, 183; Ouwehand v Hout Bay Fishing Industries 2004 25

ILJ 731 (LC); NULAW v Barnard 2001 9 BLLR 1002 (LAC); South African Post Office

v Mampeule 2009 30 ILJ 664 (LC) para 40. An employee who claims to have been

dismissed as envisaged in s 186(1)(a) of the LRA must prove that the employer had

committed an overt act that is the "sole or proximate cause" of termination of his or

her employment. 126 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC) para 32. 127 Commercial Union Assurance Co of South Africa Ltd v KwaZulu Finance and

Investment Corporation 1995 3 SA 751 (A). 128 South African Post Office v Mampeule 2009 30 ILJ 664 (LC) para 44. 129 Also see South African Post Office Ltd v Mampeule 2009 30 ILJ 664 (LC) para 43;

SATAWU obo Dube v Fidelity Supercare Service Group (Pty) Ltd 2015 36 ILJ 1923 (LC) para 34.

130 Incorporated General Insurances Ltd v Shooter t/a Shooter's Fisheries 1987 1 SA 842

(A) 862C-863B; South African Post Office v Mampeule 2010 31 ILJ 2051 (LAC) para

43. 131 NULAW v Barnard 2001 9 BLLR 1002 (LAC). 132 South African Post Office v Mampeule 2010 31 ILJ 2051 (LAC).


resolution that terminated the employment relationships. Had the winding-

up been compulsory and not voluntary, no dismissals would have occurred.

Davis JA expressed the opinion that the court's role in a compulsory

winding-up would have had the effect of breaking the causal link.133

In Nogcantsi v Mnquma Local Municipality134 Coppin JA with Landman JA

and Phatshoane AJA concurring distinguished NULAW and Mampeule by

finding that Nogcantsi was not dismissed by an act or omission by the

employer, but that the fulfilment of the resolutive condition - a negative

outcome in a vetting and screening exercise - had the effect of triggering

the "automatic termination" clause. The "automatic termination" clause in

this case required that Nogcantsi undergo a positive vetting and screening

or face automatic termination of his employment contract. The LAC held that

it was not the municipality's conduct that produced a negative vetting result

and caused the termination. The negative outcome of the vetting was an

objective fact that ended the employment relationship. Moreover, it was not

a third party that made the information negative to trigger the automatic

termination.135

In Sindane v Prestige Cleaning Services136 the worker's contract was made

dependent on the continued existence of a contract between the employer

and its client. The client "scaled down" the contract with the employer by

cancelling a contract in terms of which an extra cleaner had been provided,

which led to the termination of the employee's contract. The court held that

the employer had not performed an overt act that was the proximate cause

of the termination of employment. The contract had simply lapsed. In SA

Post Office Ltd v Mampeule137 the outcome was different. The contract

provided that the employee's employment would terminate "automatically

and simultaneously" if he ceased to hold the office of director. When

Mampeule was removed as a director, his employer claimed that his

employment contract had terminated automatically, and that no "dismissal"

had occurred.138 Ngalwana AJ disagreed, holding that the contract of

employment had to be construed together with the act of removing the

employee. The court concluded that, had the minister not removed

133 South African Post Office v Mampeule 2010 31 ILJ 2051 (LAC) paras 16-17. 134 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC). 135 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC) paras 30-31. 136 Sindane v Prestige Cleaning Services 2010 31 ILJ 733 (LC). This principle was applied

in Mahlamu v CCMA 2011 32 ILJ 1122 (LC) para 7. 137 South African Post Office v Mampeule 2009 30 ILJ 664 (LC). 138 The employer had contended that termination of the employee's contract of

employment was not caused by an act of the employer, and that no "dismissal" had occurred. South African Post Office v Mampeule 2009 30 ILJ 664 (LC) para 32.


Mampeule from the board of directors, his employment would not have

terminated. Therefore, the removal proximately or effectively caused the

termination of his employment.139 The LC in Mampeule held, and the LAC

agreed, that any act by the employer which results directly or indirectly in

the termination of the employee's contract of employment that results

directly or indirectly in the termination of the employee’s contract of

employment constitutes a dismissal.140

Where a series of events led up to the termination, the court must determine

which event terminated the contract.141 The general stance taken by the

court is that if the employer's conduct or an act by the employee is not the

proximate cause of the termination of the employment contract, the

termination does not constitute a dismissal.142 Nevertheless, the court in

Pecton held that, even if the employer did not perform an act of termination,

it remains possible for the employee to claim based on unfair dismissal if

the "automatic termination" clause is invalid and/or unenforceable.143 These

aspects are considered below.

7.2 Determining whether or not the "automatic termination" clause is

lawful and enforceable

When deciding if an "automatic termination" clause amounts to

impermissible "contracting out", the court determines whether the particular

clause falls foul of section 5(2)(b) of the LRA.144 Even if it does fall foul of

this provision, it can still be saved from invalidity by the section 5(4)-

exception.145 The LRA must be purposively construed to give effect to the

Constitution.146 Accordingly, section 5 must be interpreted in favour of

protecting employees against unfair dismissal.147 The employer bears the

evidentiary burden of proving that the "automatic termination" provision is

139 South African Post Office v Mampeule 2010 31 ILJ 2051 (LAC) para 44. 140 South African Post Office v Mampeule 2009 30 ILJ 664 (LC) paras 21, 32; South

African Post Office v Mampeule 2010 31 ILJ 2051 (LAC) para 12. 141 SATAWU obo Dube v Fidelity Supercare Cleaning Services Group (Pty) Ltd 2015 36

ILJ 1923 (LC) paras 33-34; SA Post Office Ltd v Mampeule 2009 30 ILJ 664 (LC) para 43.

142 SATAWU obo Dube v Fidelity Supercare Cleaning Services Group (Pty) Ltd 2015 36 ILJ 1923 (LC) paras 33-34; SA Post Office Ltd v Mampeule 2009 30 ILJ 664 (LC) para 43.

143 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) paras 21, 35. 144 See the wording of the section as cited under 6. 145 Mahlamu v CCMA 2011 32 ILJ 1122 (LC) para 14. 146 Section 3(b) of the LRA. Mahlamu v CCMA 2011 32 ILJ 1122 (LC) para 11. 147 Mahlamu v CCMA 2011 32 ILJ 1122 (LC) para 12.


permitted, and that in the circumstances it is permissible to contract out of

the unfair dismissal protection.148

In Pecton Outsourcing Solutions CC v Pillemer B,149 a process for

determining whether an "automatic termination" clause should be enforced

was set out.150 First, the reason for the dismissal must be considered, ie

whether it was misconduct, incapacity, operational requirements or no

reason at all. In this determination, the content of the reason must take

precedence over the form of the contractual device. If on the facts the

reason for the termination of the contract is a typical reason for a dismissal,

this evidences the possible attempt to "contract out" of the LRA. It would

then be presumed that the termination was an unfair dismissal.151 Next it

must be decided whether the dismissal was substantively, and/or

procedurally unfair, and the labour forum must award the appropriate

relief.152

The enquiry does not end there, as several additional factors are considered

by the court before employers are permitted to rely on "automatic

termination" clauses for the termination of fixed-term employment contracts.

The court in Enforce Security Group v Fikile153 had to determine whether

relying on the "automatic termination" clause was impermissible in the

circumstances. The court set out factors that must be taken into account in

determining whether the contracting parties have contracted out of the

unfair dismissal protection contained in the LRA. The court stressed that the

list is not a closed one. In determining whether in the circumstances of a

particular case the clause was intended to circumvent the obligations

imposed by the LRA and the Constitution, relevant considerations include:

the wording of the automatic termination clause; the context of the

agreement; the relationship between the fixed-term event and the purpose

of the contract with the client; whether it is left to the client to choose who

must render the services under the service agreement; whether the clause

148 Mahlamu v CCMA 2011 32 ILJ 1122 (LC) para 19. 149 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC). 150 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 46. The

court stated that the reason for setting these criteria was "at a policy level to cure the ill of TES providers constructing employment contracts that, while not inviting cancellation by a client in times of conflict with labour, certainly signal that the TES, and by extension the client, will not suffer significant legal and financial consequences should the client, for good reason or bad, turn its face against the workforce as a whole".

151 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 43. 152 SATAWU obo Dube v Fidelity Supercare Cleaning Services Group (Pty) Ltd 2015 36

ILJ 1923 (LC) para 30. 153 Enforce Security Group v Fikile (DA24/15) 2017 ZALCD 2 (25 January 2017).


is used to unfairly target a particular employee; and whether the event is

based on proper economic and commercial considerations.154 Several

facets that form part of the public policy which is the basis of the test for the

enforceability of termination clauses in fixed-term contracts are highlighted

below. Reference is made to the cases in which they have been applied,

and an attempt is made to highlight the focus of the presiding officer's

scrutiny and what was considered as carrying particular weight in the

different cases.

7.3 Public policy as a measure for enforceability

Before and after the legislative amendments, public policy played and

continues to play a role in determining whether an employee whose services

had been terminated, was dismissed. Public policy is not a stagnant

concept. Policy assists in shaping interests that are considered worthy of

recognition, and eventually these interests influence and shape the policy.

When determining whether the clause is contrary to public policy the court

must be guided by the constitutional values155 and measure these against

the pacta sunt servanda principle.156 The courts can in so doing decline to

enforce contractual terms found to be in conflict with the constitutional

values, despite the fact that the parties had agreed to them. Public policy

dictates that contractual clauses must be reasonable and fair. Fixed-term

employees must also be afforded a fair opportunity to seek judicial redress.

Several factors that the courts have considered in determining whether an

automatic termination or a dismissal has occurred are briefly considered

below.

154 Enforce Security Group v Fikile (DA24/15) 2017 ZALCD 2 (25 January 2017) para 41. 155 In Napier v Barkhuizen 2006 4 SA 1 (SCA) para 7 the SCA linked public policy to the

Constitution by finding that public policy "… now derives from the founding

constitutional values of human dignity, the achievement of equality and the

advancement of human rights and freedoms, non-racialism and non-sexism". Clauses

that are ruled "unreasonable, oppressive or unconscionable" by the court would

generally be considered contrary to the constitutional values. Also see Barkhuizen v

Napier 2007 5 SA 323 (CC) paras 11, 13, 15, 51, 140. Public policy also needs to

consider "the necessity to do simple justice between individuals. The court has held

that the public policy is informed by the principle of ubuntu" - Barkhuizen v Napier

2007 5 SA 323 (CC) para 51; see further Sasfin (Pty) Ltd v Beukes 1989 1 SA 1 (A)

9F-G; Jajbhay v Cassim 1939 AD 537 544. 156 The principle of pacta sunt servanda is subject to the Constitution. Barkhuizen v

Napier 2007 5 SA 323 (CC) para 15.


7.3.1 Constitutional values

The values entrenched in the Constitution and the Bill of Rights157 form the

foundation of public policy.158 Fixed-term employment relationships are

based on the notion that employers and employees have the right to

contract freely to ensure predictability and control in so far as the terms of

their engagement are concerned.159 The fundamental constitutional values

of freedom, equality, and human dignity favour the recognition of the

freedom to contract and to be bound to contracts voluntarily entered into.

Public policy dictates that agreements concluded freely and voluntarily

should be enforced no matter how unfair they appear to be.160 This principle

is premised on the understanding that the creation of a contract is the result

of a free choice.161 However, the principle which is acknowledged as part of

public policy is also qualified by it.162 The court can declare contractual

terms that conflict with the constitutional values or the public policy

unenforceable despite the fact that the parties had agreed upon them.163

Public policy also requires fairness, justice, and reasonableness.164

Different aspects of these requirements are elaborated on below.

7.3.1.1 The right to fair labour practices

The LRA was enacted to give effect to the right to fair labour practices

established in section 23(1) of the Constitution.165 The right not to be unfairly

dismissed is essential to this constitutional right.166 It serves to protect

157 Chapter 2 of the Constitution. 158 Sections 1, 7(1) of the Constitution. Also see Barkhuizen v Napier 2007 5 SA 323 (CC)

paras 28-29. 159 Gericke 2011 PELJ; Buthelezi v Municipal Demarcation Board 2004 25 ILJ 2317 (LAC)

paras 10-11. 160 Bhana, Bonthuys and Nortje Student's Guide 162. New Reclamation Group (Pty) Ltd

v Davies (17200/2013) 2014 ZAGPJHC 63 (20 March 2014) para 4; Sunshine Records (Pty) Ltd v Frohling 1990 4 SA 782 (A) 794B-D; Reddy v Siemens Telecommunication (Pty) Ltd 2007 2 SA 486 (SCA) para 15.

161 Hutchison and Pretorius Law of Contract 23; New Reclamation Group (Pty) Ltd v Davies (17200/2013) 2014 ZAGPJHC 63 (20 March 2014) para 4; Sunshine Records (Pty) Ltd v Frohling 1990 4 SA 782 (A) 794B-D. Also see Reddy v Siemens Telecommunication (Pty) Ltd 2007 2 SA 486 (SCA) para 15.

162 Van Jaarsveld 2003 SA Merc LJ 326, 328. 163 Barkhuizen v Napier 2007 5 SA 323 (CC) para 30. 164 Barkhuizen v Napier 2007 5 SA 323 (CC) para 73. 165 Section 1(a) of the LRA. Mahlamu v CCMA 2011 32 ILJ 1122 (LC) para 11. 166 NEHAWU v University of Cape Town 2003 24 ILJ 95 (CC) para 42; Fedlife Assurance

Ltd v Wolfaardt 2001 12 BLLR 1301 (A) para 32.


vulnerable employees, which is consistent with the main purpose of labour

law.167

Section 185 of the LRA determines that every employee has the right not to

be unfairly dismissed. In assessing whether an "automatic termination"

clause should be enforced in a particular instance, the right to job security

that fixed-term employees enjoy must be weighed against the principle of

the sanctity of contract.168

7.3.1.2 The right to job security of an individual worker as opposed to the

entire workforce

In Twoline Trading 413 (Pty) Ltd t/a Skosana Contract Labour v Abram

Mongatane169 Snyman AJ held that, if the entire service agreement between

the client and the TES is either completed or terminated, it is not individual

workers being dealt with. The termination of the whole service agreement

would amount to the completion of the entire project. If the entire underlying

contract between the TES and the client is terminated, the employees'

contracts would terminate automatically if their contracts include provisions

to the effect that the contracts would terminate in that event, and properly

defines that as the terminating event.170 By this reasoning, the employment

of workers in a temporary employment service situation is made an

accessory contract. The main contract is the one between the TES and the

client. If the principal contract is extinguished, the accessory agreement is

also terminated without legal consequence.

However, in Pecton Outsourcing Solutions CC v Pillemer B, 171 the question

of whether it makes a difference whether one employee is affected or the

entire workforce was answered: no, it does not.172 In Pecton, a third party

had initiated the termination. The entire workforce was left jobless, because

the entire service agreement had been terminated.173 In Mahlamu v

167 Sidumo v Rustenburg Platinum Mines Ltd 2007 12 BLLR 1097 (CC) paras 72, 74;

Mahlamu v CCMA 2011 32 ILJ 1122 (LC) para 11; NEHAWU v University of Cape

Town 2003 24 ILJ 95 (CC) para 42; South African Post Office v Mampeule 2010 31

ILJ 2051 (LAC) para 21. 168 Hutchison and Pretorius Law of Contract 196. 169 Twoline Trading 413 (Pty) Ltd t/a Skosana Contract Labour v Abram Mongatane 2014

JOL 31668 (LC) para 60. 170 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 38;

Twoline Trading 413 (Pty) Ltd t/a Skosana Contract Labour v Abram Mongatane 2014

JOL 31668 (LC) para 63. 171 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC). 172 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 39. 173 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 32.


CCMA174 an individual worker had been targeted, but the service agreement

between the TES and the client remained in place. The LC in Pecton noted

that the effect was the same: the operation of the "automatic termination"

clauses "left the employees' security of employment entirely dependent on

the will (and the whim) of the client".175 The client could at any time, for any

reason, simply state that the applicant's services were no longer required.

That would have resulted in an automatic termination, leaving the employee

with no recourse.176 In Pecton, the court held that, despite the fact that the

affected employees' contracts were not terminated by "conduct relating to

or directed at a particular employee" or "an act of the employer",177 and that

it had not been an individual employee who had been targeted, the

termination of employment could still be a dismissal.178 Although this case

was decided before the amendments to the LRA, it nevertheless indicates

a judicial move towards stricter scrutiny of "automatic termination" clauses

better to protect the job security of agency workers.

7.3.1.3 The commercial rationale for using fixed-term contracts

The commercial rationale or the permissibility for the use of fixed-term

contracts is also an important consideration. Public policy requires that

everyone should be free to participate productively in the business and

professional world. Consequently, an unreasonable restriction of a person's

freedom to do so will not be enforced.179 Fixed-term employment serves a

valid commercial function. It may be necessary for employers to make use

of additional temporary labour when there is a seasonal influx of work. Using

temporary employment services also offers employers the advantage of

accessing specialised skills at a fraction of the costs associated with the

employment of standard employees.180 Basson J in Sindane v Prestige

Cleaning Services181 indicated what the commercial rationale is for the

conclusion of fixed-term contracts that terminate upon the occurrence of a

specific event. This particular type of fixed-term contract is used if it is not

possible to agree on a fixed period of employment, or because there is no

definitive starting and ending date, because it is not certain when the project

or building contract which the employee is appointed to work on will be

174 Mahlamu v CCMA 2011 32 ILJ 1122 (LC). 175 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 33. 176 Mahlamu v CCMA 2011 32 ILJ 1122 (LC) para 10. 177 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 41. 178 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 42. 179 Reddy v Siemens Telecommunications (Pty) Ltd 2007 2 SA 486 (SCA) paras 11, 15. 180 Forere 2016 SA Merc LJ 388. 181 Sindane v Prestige Cleaning Services 2010 31 ILJ 733 (LC).


completed.182 For instance, in Enforce Security Group v Fikile the LAC

acknowledged the commercial rationale of this type of contract by noting

that including an "automatic termination" clause that links the termination of

employment to the completion of a contract should not immediately make a

termination of that contract on legitimate terms or for legitimate reasons a

dismissal. That would in the court's view defeat the whole purpose of

concluding fixed-term contracts of this nature.183

7.3.2 The right to access to legal redress

Section 34 of the Constitution determines that everyone has the right to

seek assistance from the courts or other forums to resolve their disputes.184

That people should not be denied the right to access to justice by referring

a dispute for resolution due to a contractual undertaking is also part of our

common law. In Schierhout v Minister of Justice185 it was held that if clauses

in a contract have the effect of depriving one of the contracting parties of

legal rights or prohibit him or her from seeking redress that he or she would

ordinarily be entitled to, those clauses of the agreement would be "against

the public law of the land".186

To prevent persons from seeking assistance from the courts or other

tribunals and to access judicial redress would be contrary to public policy.187

However, the highest court has acknowledged that it is possible to restrict

the right to legal redress in certain circumstances, which is also part of public

policy.188

182 Sindane v Prestige Cleaning Services 2010 31 ILJ 733 (LC) para 16. 183 Enforce Security Group v Fikile (DA24/15) 2017 ZALCD 2 (25 January 2017) para 42. 184 Barkhuizen v Napier 2007 5 SA 323 (CC) paras 31-33. 185 Schierhout v Minister of Justice 1925 AD 417. 186 Schierhout v Minister of Justice 1925 AD 417 424; Bonino v De Lange 1906 TS 120

123-124; Barkhuizen v Napier 2007 5 SA 323 (CC) para 34. 187 See, for instance, Administrator Transvaal v Traub 1989 4 SA 729 (A) 764E; Avex Air

(Pty) Ltd v Borough of Vryheid 1973 1 SA 617 AD 621F-G; Stokes v Fish Hoek

Municipality 1966 4 SA 421 (C) 423H-424C; Gibbons v Cape Divisional Council 1928

CPD 198 200; Benning v Union Government (Minister of Finance) 1914 AD 29 31. 188 Barkhuizen v Napier 2007 5 SA 323 (CC) para 48.


7.4 Sanctity of contract and minimum judicial interference in

contracts

The English case, Printing and Numerical Registering Co v Sampson189 that

has been applied in South African cases determines that public policy

requires that mature and competent men should be free to contract, and

that they should be bound to the agreements that they enter into

voluntarily.190 The SCA has also cautioned against undue judicial

interference with contracts by the court, even if the terms appear unfair or

operate harshly against one of the parties. The court stressed that dignity

and autonomy finds expression in the freedom to regulate one's life by

contracting freely, and that judges should avoid the contractual arena,

especially if they could risk imposing their own conceptions of justice and

fairness on the parties.191 This is why the principle of sanctity of contract

has so often prevailed.192

7.5 The public interest element

The LRA caters for both individual interests and for the public

interest.193 Brassey states that employers are often regarded as strong

enough to fend for themselves, but not employees. That is why employees

are seldom considered to be in a position to waive or abandon statutory

rights. The accepted approach is that a statutory right can be waived, unless

the right also serves the public interest. As the public has an interest in

ensuring that the weak are not exploited, provisions cannot be waived if they

are intended for the special protection of persons who are considered to be

incapable of protecting themselves.194

In Igbo v Johnson Matthey Chemicals Ltd,195 it was held that statutory rights

189 Printing and Numerical Registering Co v Sampson 1875 LR 19 Eq 462. In Wells v

South African Aluminite Company 1927 AD 69 73 this passage was quoted with approval.

190 Jessel MR in Printing and Numerical Registering Co v Sampson 1875 LR 19 Eq 462 465.

191 Napier v Barkhuizen 2006 4 SA 1 (SCA) para 12; Barkhuizen v Napier 2007 5 SA 323

(CC) para 12. 192 Roffey v Catterall, Edwards and Goudre (Pty) Ltd 1977 4 SA 494 (N) 505F; Basson v

Chilwan 1993 3 SA 742 (A) para 50. 193 Brassey Commentary on the Labour Relations Act A2-9, A211; SA Eagle Insurance

Co Ltd v Bavuma 1985 3 SA 42 (A) 49G-H; Bafana Finance Mabopane v Makwakwa

2006 4 SA 581 (SCA) para 10; Denel (Pty) Ltd v Gerber 2005 9 BLLR 849 (LAC) para

24; South African Post Office v Mampeule 2010 31 ILJ 2051 (LAC) para 21. 194 Brassey Commentary on the Labour Relations Act A9-6 - A9-7; Mahlamu v CCMA

2011 32 ILJ 1122 (LC) para 20. 195 Igbo v Johnson Matthey Chemicals Ltd 1986 IRLR 215 (CA).


cannot be waived, even by consensual agreement.196 In SA Post Office Ltd

v Mampeule197 the court agreed that contractual terms that amount to a

"contracting out" of the protection against unfair dismissal in terms of section

5 of the LRA198 is prohibited.199 In the LAC Patel JA agreed with the LC that

provisions like the "automatic termination" provisions on which the employer

had relied restricts the protections in the LRA and possibly of the rights in

the Constitution in an impermissible way. These clauses are against public

policy as the dismissal protection benefits all employees and not just the

individual worker. The court reasoned that to uphold the "automatic

termination" provision in that case would set a dangerous precedent. The

LRA's provisions would then be too easily circumvented by similar terms in

future contracts.200 The LAC in Mampeule held that automatic termination

clauses are undesirable in the labour relations context as they could

undermine the developments in progressive disciplinary measures provided

for in the LRA, and render the legislation ineffectual.201 Likewise, in

Mahlamu v CCMA202 the court acknowledged that the issue of the validity

and enforceability of "automatic termination" clauses is important "beyond

the direct interests of the parties".203 Amendments to the working conditions,

and the way in which they are regulated have a material impact on the lives

of affected workers and the way in which employment agencies run their

undertakings in South Africa.204 A need exists to maintain labour flexibility

to promote the economy.205 However, this must be viewed in the light of the

rights and values entrenched in the Constitution as the supreme law of

South Africa, and the protections extended by the LRA, which was enacted

to give effect to the right to fair labour practices.

196 South African Post Office v Mampeule 2010 31 ILJ 2051 (LAC) para 46. 197 South African Post Office v Mampeule 2010 31 ILJ 2051 (LAC) para 23; Mahlamu v

CCMA 2011 32 ILJ 1122 (LC) para 8. 198 Notably, s 5 of the LRA had not been referred to specifically by Ngalwana J in the

lower court in reaching the same conclusion. 199 Mahlamu v CCMA 2011 32 ILJ 1122 (LC) paras 8, 21. 200 South African Post Office v Mampeule 2009 30 ILJ 664 (LC) para 46; South African

Post Office v Mampeule 2010 31 ILJ 2051 (LAC) para 5. 201 South African Post Office v Mampeule 2009 30 ILJ 664 (LC) para 33. 202 Mahlamu v CCMA 2011 32 ILJ 1122 (LC). 203 Mahlamu v CCMA 2011 32 ILJ 1122 (LC) para 14. 204 See the discussion of the different views concerning whether the amendments led to

increased use of agency work or to job losses in the introduction of Aletter and Van Eck 2016 SA Merc LJ 286, 287.

205 Forere 2016 SA Merc LJ 396. The author argues that the competing interests that must be weighed up are the need to protect non-standard workers and the need to maintain a level of flexibility in the labour legislation to counter the high levels of unemployment in the country.


7.5.1 Good faith

Good faith is a factor that the court takes into account in determining the

public interest, which is part of public policy.206 In assessing the validity of

"automatic termination" clauses, it is considered whether "public morality is

offended" by the enforcement.207

The relationship between an employer and an employee is of a fiduciary

nature.208 The good faith requirement is implied into contracts of

employment.209 Therefore, whether the employer and the employee acted

in good faith at the time of termination of the employment relationship,210 or

whether one or both had breached the fiduciary relationship, would play a

role in determining whether a dismissal had occurred. In Nogcantsi v

Mnquma Local Municipality,211 the employee had failed to disclose at his

interview that there was a pending case against him, and this was revealed

only after the vetting yielded a negative result, which was the trigger for the

automatic termination. The LAC considered requiring the vetting to be

justified considering the nature of the work.212 In other words, this was a

material term of the employment contract. In my opinion, the employer,

based on the breach of the duty of good faith, could have cancelled the

employment contract without relying on the automatic termination clause.213

The question of whether contributory fault on the part of the employee has

an influence on an employee's claim has come to the fore in several

decisions concerning the premature termination of fixed-term contracts. In

Dladla v On-Time Labour Hire CC,214 the employee had continually arrived

206 Van Huyssteen et al Contract paras 7.25-7.27. 207 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 23. 208 There is a common-law duty of trust and confidence between employers and

employees. See Council for Scientific & Industrial Research v Fijen 1996 17 ILJ 18 (A) 20B-D.

209 The Constitution has caused the common law to develop so that an implied undertaking that the employer will treat the employee fairly is included in every contract of employment. See Barkhuizen v Napier 2007 5 SA 323 (CC) paras 21, 80; Murray v Minister of Defence 2008 29 ILJ 1369 (SCA); Nakin v MEC, Department of Education, Eastern Cape Province 2008 29 ILJ 1426 (E). Also see Grogan Workplace Law 62.

210 A court must have regard to the circumstances of the case at the time enforcement of the agreement is sought. Sunshine Records (Pty) Ltd v Frohling 1990 4 SA 782 (A) 794D; Magna Alloys and Research (SA) (Pty) Ltd v Ellis 1984 4 SA 874 (A) 893-894.

211 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC). 212 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC) para 42. 213 Also see Van Huyssteen et al Contract para 3.59, which supports that at a pre-

contractual stage the parties already have a duty of good faith. In para 11.70 breach of a material term of a contract is recognised as ground for cancellation.

214 Dladla v On-Time Labour Hire CC 2006 27 ILJ 216 (BCA) 219, 222.


late to work, and the client terminated his employment. The employee was

considered to have been partly to blame for the client's decision not to

continue with the employment relationship. This was ruled to be an

automatic termination.

In Pecton Outsourcing Solutions CC v Pillemer B,215 the commissioner

found that the termination of the workers' employment had not been caused

by the unprotected strike which the workers had embarked upon, but that

having gone on an illegal strike did play a contributory role. On review,

Whitcher J in the LC rejected this finding as it suggested that the employees

had been partially to blame for the termination of their employment. The

court held that the termination had resulted from the termination of the

service agreement by the client instead.

In Buthelezi v Municipal Demarcation Board 216 Brassey AJ in the trial court

ruled the fixed-term employee's dismissal substantively unfair, to a limited

extent. He held that the appropriate compensation to redress the

substantive unfairness was an amount equivalent to the remuneration the

appellant would have been paid for the balance of the contract period, less

what he got from other employment. Nevertheless, Brassey AJ found that

Buthelezi was not entitled to compensation because he had committed

misconduct before the dismissal had become effective, which the court felt

could justify dismissal.217 The LAC disagreed, finding that denying the

employee compensation as a remedy was unjust because the lower court's

view that Buthelezi could have been justifiably dismissed was based on

speculation.218

Lack of good faith is not a stand-alone ground that can be raised to deny

the enforcement of an "automatic termination" clause.219 Nevertheless, it

may play a role when it comes to determining whether the employment

contract was genuinely terminated by operation of law, or whether in fact

there existed a different reason for the termination of the employee's

employment. For instance, if the employer seeks to rely upon an "automatic

termination" clause relating to the happening of a certain event, and the

court rules that the event was contrived, the "automatic termination" clause

215 Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) para 17. 216 The case dealt with the premature termination of a fixed-term contract, and not so

much termination by means of an automatic termination clause. Nevertheless, the principle applied is relevant.

217 Buthelezi v Municipal Demarcation Board 2004 25 ILJ 2317 (LAC) para 6. 218 Buthelezi v Municipal Demarcation Board 2004 25 ILJ 2317 (LAC) para 19. 219 Barkhuizen v Napier 2007 5 SA 323 (CC) para 82.


will not be enforced.220 If it appears to the court that the employer abused

the “automatic termination” clause, the inference can be drawn that it is

relied upon by the employer to avoid legal obligations in terms of the LRA.221

The motivation for the inclusion of the "automatic termination" clause in the

contract could arguably also play a role. For instance, in Nogcantsi v

Mnquma Local Municipality the LC and LAC agreed that there was a sound

reason for the inclusion of the condition requiring vetting of a security officer

in the contract, and the court concluded that no dismissal had occurred.222

However, a pure motive would not necessarily mean that the clause would

be enforced. For example, in Igbo v Johnson Matthey Chemicals Ltd223 the

"automatic termination" clause was included to ensure that the

employee going overseas did not overstay her leave. The aim was to

prevent loss resulting from her absenteeism. Despite the noble

motivation for the inclusion of the "automatic termination" clause, and

for its enforcement, the Appeal Court declared the "automatic

termination" clause invalid and held that the employee, who had failed to

return on the stipulated date, was dismissed.

If the true reason for the termination of the employee's employment relates

to the employee's conduct or capacity, or the employer's financial situation,

it would constitute a dismissal, despite the "automatic termination" clause in

a fixed-term contract.224 In Pecton Outsourcing Solutions CC v Pillemer B225

the LC found that the underlying reason for the termination of the

employee's contract was financial. Pecton had lost its only client, and could

no longer afford to keep on its workers. However, if the "automatic

termination" clause were enforced it would effectively have deprived the

employees of the right to have their dispute concerning an unfair

retrenchment heard by the court. Ordinarily, employees who are dismissed

for operational reasons would be entitled to severance pay. This they would

also have been denied if the "automatic termination" clause had been

220 In Trio Glass t/a The Glass Group v Molapo 2013 34 ILJ 2662 (LC) the employer, for

instance, unsuccessfully sought to rely on an alleged agreement that the contract would lapse automatically "if things didn't work out". Also see Grogan Workplace Law 167. In Pecton Outsourcing Solutions CC v Pillemer B 2016 37 ILJ 693 (LC) paras 34-35 the court considered the "true cause" of the termination of the employee's employment. However, it noted that the crisp issue to be decided was whether the termination clause was enforceable in terms of section 5 of the LRA.

221 South African Post Office v Mampeule 2010 31 ILJ 2051 (LAC) para 24. 222 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC) paras 27-29. 223 Igbo v Johnson Matthey Chemicals Ltd 1986 IRLR 215 (CA). 224 Pecton Outsourcing Solutions CC v Pillemer B 2016 37 ILJ 693 (LC) para 44. 225 Pecton Outsourcing Solutions CC v Pillemer B 2016 37 ILJ 693 (LC).


enforced. In the result, the court agreed with the commissioner's finding that

in terms of section 5 of the LRA the automatic termination clause was

unenforceable.226

In South African Post Office v Mampeule,227 the question was asked

whether the employer had implemented the "automatic termination" clause

in good faith.228 The court noted that the employer had failed to explain why

the "automatic termination" clause had been triggered, and why the

employee had been suspended. The court inferred that this was done to

avoid obligations under the LRA. In the result, the court held that section 5

of the LRA trumped the "automatic termination" clause. The employer had

put forward as a reason for his removal as a director that Mampeule's

"conduct led to the shareholder losing trust and confidence in [him]".229 The

LAC correctly held that this would not entitle the employer to rely on an

"automatic termination" clause, adding that chapter 8 of the LRA, and the

right to fair labour practices, could be circumvented by including a clause in

every employee's contract that his or her employment would terminate

automatically on the occurrence for example of an act of misconduct or

incapacity.230 However, in Enforce Security Group v Fikile the "automatic

termination" clause that determined that the workers' employment would

terminate when the contract between the employer and the client was

terminated contained a sub-clause. It stated that "the employee agrees that

the contract of employment would terminate automatically upon termination

of the Boardwalk contract and that such termination would not constitute a

retrenchment but a completion of the contract". Although this appears to be

a patent exclusion of the dismissal protection in terms of the LRA for

dismissal for operational reasons, the LAC accepted that the sub-clause

served only to explain the consequences of the agreed upon terms.231

7.5.2 Fairness

A court cannot set aside an agreement unless the provisions are unfair.232

However, fairness, like good faith, is an abstract concept.233 Moreover, the

concept applies to both the employer and the employee.234 Finding the right

226 Pecton Outsourcing Solutions CC v Pillemer B 2016 37 ILJ 693 (LC) para 45. 227 South African Post Office v Mampeule 2010 31 ILJ 2051 (LAC). 228 South African Post Office v Mampeule 2010 31 ILJ 2051 (LAC) para 15. 229 South African Post Office v Mampeule 2010 31 ILJ 2051 (LAC) para 20. 230 South African Post Office v Mampeule 2009 30 ILJ 664 (LC) para 33. 231 Enforce Security Group v Fikile (DA24/15) 2017 ZALCD 2 (25 January 2017) para 42. 232 Sasfin (Pty) Ltd v Beukes 1989 1 SA 1 (A). 233 Brisley v Drotsky 2002 4 SA 1 (SCA) para 22. 234 NEHAWU v University of Cape Town 2003 24 ILJ 95 (CC) paras 40-41.


balance between the competing rights of employers and employees when

it comes to automatic termination of employment is complicated. Employees

would rather be employed on a non-standard basis than be unemployed.235

Arguably, they may be more inclined to sign employment contracts, even

on detrimental terms, than to join the ranks of the unemployed. This

supports the general sentiment that agreements that have been freely

entered into must be honoured.236 However, enforcement could result in the

denial of an employee's statutory rights.237 Therefore, the enforcement of a

contractual clause must be fair and reasonable.238 Although pacta sunt

servanda cannot be ignored, the court should be able to decline enforcing

a contractually agreed upon clause if doing so would be unreasonable or

lead to injustice.239

The circumstances under which the contract was terminated must be

considered.240 Objective factors like the terms of the contract must be

evaluated. In addition, the relative situation of the parties and their

respective bargaining power must be taken into account.241 Immoral

agreements violate the public policy. In some instances contractual clauses

are "so unreasonable that their unfairness is manifest" and no further

enquiry would be necessary to conclude that they should not be enforced.

235 Forere 2016 SA Merc LJ 377. 236 See for instance, Chiloane v Rema Tip Top Industries (Pty) Ltd 2002 11 BLLR 1066

(LC) in particular paras 5, 7. 237 Cohen 1998 SA Merc LJ 383, 385. 238 Zero Model Management (Pty) Ltd v Barnard (25541/2009) 2009 ZAWCHC 232 (18

December 2009) para 59. 239 Barkhuizen v Napier 2007 5 SA 323 (CC) para 70. 240 Compare Barkhuizen v Napier 2007 5 SA 323 (CC) para 58. 241 Basson v Chilwan 1993 3 SA 742 (A) paras 55-56, 59; Barkhuizen v Napier 2007 5

SA 323 (CC) paras 56, 59. In South African Post Office v Mampeule 2010 31 ILJ 2051

(LAC) para 41 the court held that in determining the proximate cause of the termination

of employment it is not possible to consider the employment contract in isolation

without considering the act of termination, in this case the employee's removal from

the board. In the dissenting judgment in Barkhuizen para 87 Sachs J stated that the

power imbalances and relative bargaining powers of the parties comes into play when

determining whether true consensus had been reached between the parties.

However, a contrary view was raised that the notion that employers and employees

are unequal bargaining parties was outmoded, and that an urgent reason for a desire

to contract did not result in unequal bargaining power. See Christie and Bradfield Law

of Contract 383; Van Huyssteen et al Contract paras 1.37, 1.52. Moseneke DCJ in his

dissenting judgment in Barkhuizen v Napier 2007 5 SA 323 (CC) paras 96-105 also

felt that the question is of whether the contractual clause itself clashes with the public

norms. In other words, it must be assessed whether the contractual clause itself is,

objectively speaking, so unreasonable as to offend the public policy. This objective

assessment that Moseneke DCJ proposes would render the personal attributes of the

party seeking to avoid the operation of the clause, the employee, irrelevant.


An example is an outright contractual denial of the right to seek judicial

redress.242

When determining whether a clause is fair or unfair, it must be asked

whether the clause is in itself unreasonable, and if not, whether

circumstances dictate that the clause should be enforced.243 When

answering this question, establishing if the contract had been entered into

freely and voluntarily is pivotal.244 In Nogcantsi v Mnquma Local

Municipality,245 the LAC stressed that Nogcantsi had freely agreed to the

vetting and the "automatic termination" clause, and that he was fully aware

of the implications of the agreement that he had signed. Referring to SA

Post Office v Mampeule and Mahlamu the court held that the condition in

the present instance was acceptable. The court reasoned that making an

appointment or continued employment conditional on a positive vetting and

screening exercise was justified given the nature of the work. Moreover,

providing that the contract would terminate automatically if the result of the

vetting was negative did not deprive an employee of the right to security of

employment.246

The court has previously grappled with the question of when intervention is

called for, because enforcement of an "automatic termination" clause would

be unfair. For instance, in April v Workforce Group Holdings (Pty) Limited

t/a The Workforce Group247 the commissioner, despite acknowledging the

unfairness of the enforcement of the "automatic termination" clause,

considered it to be a loophole in the LRA as it was before the amendment,

and felt that this did not warrant declaring the "automatic termination" clause

invalid. This decision was based squarely on pacta sunt servanda.248 The

recent finding of the LAC in Enforce Security Group v Fikile249 also supports

that fairness is placed on the back burner when it comes to determining

242 Barkhuizen v Napier 2007 5 SA 323 (CC) para 60. 243 Barkhuizen v Napier 2007 5 SA 323 (CC) para 56. With reference to Magna Alloys

and Research (SA) (Pty) Ltd v Ellis 1984 4 SA 874 (A) Breitenbach AJ in Zero Model Management (Pty) Ltd v Barnard (25541/2009) 2009 ZAWCHC 232 (18 December 2009), which concerned the validity of a restraint of trade clause paras 34-40, noted that whether a contractual term is enforceable or not depends on the circumstances, and on whether enforcing the contractual clause would be contrary to public policy. If it would be, the clause would be unenforceable.

244 Barkhuizen v Napier 2007 5 SA 323 (CC) para 57. 245 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC). 246 Nogcantsi v Mnquma Local Municipality 2017 4 BLLR 358 (LAC) paras 15, 21-24. 247 April v Workforce Group Holdings (Pty) Limited t/a The Workforce Group 2005 26 ILJ

2224 (CCMA). 248 April v Workforce Group Holdings (Pty) Limited t/a The Workforce Group 2005 26 ILJ

2224 (CCMA) 2228-2234. Forere 2016 SA Merc LJ 381. 249 Enforce Security Group v Fikile (DA24/15) 2017 ZALCD 2 (25 January 2017).


whether a dismissal or an automatic termination occurred. It was held that

the fact that the employer could retrench the employees or could have

considered other options instead of relying on the "automatic termination"

clause cannot be used to negate the clear terms agreed to by the parties.

The considerations of the fairness or otherwise of a dismissal does not

come into play in the process of determining whether a dismissal had

occurred.250

The amendments to the LRA that have informed recent decisions and could

influence future determinations regarding the validity and enforceability of

"automatic termination" clauses are considered next.

8 The impact of the extension of labour protection to

vulnerable workers

One of the main amendments that have been made to the LRA is that for

the first time atypical employees are recognised as being particularly

vulnerable to abuse. Brassey and Cheadle indicate that, before the

legislative interventions to provide protection to agency workers,

employment agencies used to structure their relationships so that these

workers would not be recognised as employees, but rather be viewed as

being independent contractors. This was done predominantly to avoid being

subject to the wage regulation mechanisms in legislation at the time.251 In

due course, the 1982 legislation was amended so that the employment

agency would be "deemed" the employer if it was the agency who paid the

agency worker/s to provide the workers with more certainty.252

Nevertheless, employers were able to avoid the legislative protective

measures for unfair dismissal.253

Concerns regarding the lack of security that "non-standard" employees

enjoy, particularly those working for labour brokers, obviously informed the

labour reform. That these employees remain particularly vulnerable was

confirmed when COSATU urged the legislature to ban the use of

employment agencies altogether.254 There is also no denying that there is a

250 Enforce Security Group v Fikile (DA24/15) 2017 ZALCD 2 (25 January 2017) para 24.

However, compare Pecton Outsourcing Solutions CC and Pillemer B 2016 37 ILJ 693 (LC) paras 21, 35, where the principle of fairness apparently bore more weight.

251 Brassey and Cheadle 1983 ILJ 31, 37. 252 Benjamin Law and Practice 2. 253 Benjamin Law and Practice 2. 254 Van Niekerk et al Law@work 68. Also see Aletter and Van Eck 2016 SA Merc LJ 289.


paramount need to preserve employment and to address the unemployment

crisis in South Africa in the light of soaring unemployment rates.255

Section 198 of the LRA was amended to address more effectively certain

problems associated with temporary employment. The main thrust of the

amendment is to limit the employment of more vulnerable, lower-paid

workers to situations of genuine temporary work.256 Moreover, the

amendments aim to protect workers from the abusive practices associated

with labour broking and other types of "non-standard" employment.257 The

extension of the protection provided, particularly to "non-standard"

employees who earn below the threshold as provided for in section 6(3) of

the Basic Conditions of Employment Act 75 of 1997 as amended by the

Basic Conditions of Employment Amendment Act 20 of 2013 ("the BCEA"),

is significant.258 The legislature did not change much in so far as higher-paid

fixed-term employees are concerned. They are assumed to be on a better

footing to negotiate contractual remedies.259

255 The Statistics South Africa Quarterly Labour Force Survey indicates that the

unemployment rate is currently set at around 27,1% (Statistics South Africa 2016 http://www.statssa.gov.za/publications/P0211/P02113rdQuarter2016.pdf).

256 Employers have often abused non-standard employment arrangements to retain employees in poor working conditions without the prospect of becoming permanent, despite the fact that the nature of the work better suits indefinite employment. Van Van Eck 2014 IJCLLIR 29, 30; Cohen and Moodley 2012 PELJ 320.

257 The impetus for doing so is well summarised in Dyokwe v De Kock 2012 10 BLLR 1012 (LC). In Dyokwe, the employer had shifted employees to the labour broker in order to exploit them. Also see Le Roux 2012 CLL 21; Van Eck 2012 IJCLLIR 29, 37, 38; Forere 2016 SA Merc LJ 375, 393; Scheepers 2015 http://www.linkedin.com/pulse/regulation-non-standard-a-typical-employment-south-scheepers.

258 The amount is currently set at R205 433,30 per annum. The threshold is anticipated to increase with effect from July 1, 2017. Aletter and Van Eck 2016 SA Merc LJ 285, 310. Workers earning more than the threshold amount are excluded from most of the new protections. The legislature focussed on less affluent workers, who are regarded as more vulnerable to exploitation. In Le Roux 2012 CLL 95-99, the statutory provisions before the amendments and after the amendments to the LRA are summarised.

259 Forere 2016 SA Merc LJ 382. The author indicates that higher-earning employees are probably less vulnerable because they are usually university graduates who are in a better position to "negotiate and to claim statutory rights". This statement is unsupported by evidence and probably incorrect. The notion that someone appointed on a fixed-term basis or to perform temporary employment services earning above a specific amount suddenly acquires better negation skills, whereas someone earning below the specified amount does not have them, is in my opinion facile. The amount that is set and the distinction that results from the enforcement of this provision are arbitrary. In addition, the legislative provisions in s 198 exclude higher-earning employees from their operation, so the author must have meant that they are in a better position to negotiate contractual remedies, and not statutory rights.


In the tripartite relationship, employees used to have difficulties in identifying

against whom the rights that they have can be enforced.260 This problem

has been resolved to some extent. That written particulars of employment

must be provided by the TES to employees engaged in temporary

employment services makes it clear who the employer is.261 Written details

of the terms and conditions of employment under the client to which he or

she is assigned must be provided.262 These terms and conditions of

employment must comply with employment law, sectoral determination, or

the bargaining council agreement applicable to a particular client.263 Offers

to renew fixed-term contracts must also be in writing, and state the reasons

for the extension.264 These requirements apply to all TES employees, and

not only to those earning less than the threshold amount.265 In terms of the

new provisions in the LRA, employers are required after three months of

employment to treat a fixed-term employee earning below the prescribed

threshold amount no less unfavourably than a comparable indefinitely

appointed employee working in the same workplace.266 This would in

practical terms probably reinforce that fixed-term employees should receive

notice before termination of their employment. Moreover, the fact that the

dismissal protection of fixed-term employees has been extended also to

cover instances where an employee expected to be kept on permanently267

arguably places a stricter duty on the employer, particularly in instances

where contracts have been renewed, to give notice.

Before the amendments were promulgated, a fixed-term employee's only

remedy for unfair dismissal fell under section 186(1)(b) of the LRA. The

problems with section 186(1)(b) as opposed to the ordinary unfair dismissal

provision in section 186(1)(a) were manifold. One concern was that

uncertainty existed concerning the proper construct that should be afforded

to the section. In particular, it was unclear whether the section applied only

to instances where fixed-term employees expected temporary renewal of

their contracts, or whether it could cover the situation where the employer

had created the expectation that the employee would be kept on

260 Tshoose and Tsweledi 2014 LDD 334. 261 Section 198(4B) of the LRA. 262 Refer to s 29 of the BCEA, which describes the details that must be provided in these

written particulars. 263 Section 198(4C) of the LRA. 264 Section 198B(6)(a) and (b) of the LRA. 265 Aletter and Van Eck 2016 SA Merc LJ 291. 266 Section 198A(5) of the LRA applies in respect of employees performing temporary

employment services. A similar principle is contained in respect of other fixed-term employees earning below the threshold in s 198B(8)(a) of the LRA.

267 The wording of s 186(1)(b) has been extended expressly to cover this situation so as to remove the uncertainty regarding the scope of the dismissal protection.


permanently. This question has been resolved. Section 186(1)(b) has been

amended in a way that leaves no room for doubt that if an employee

harboured a reasonable expectation of being kept on in the position

indefinitely, that employee would be covered by section 186(1)(b).268

Another important amendment in so far as the dismissal protection available

to fixed-term employees is concerned is the new dismissal provision relating

to agency employment in particular. Fixed-term employment for employees

earning below the stipulated threshold amount can be only for three months

unless it is justified or if the situation falls into one of the exceptions.269 In

doing this, the legislature has ensured that non-standard employment

relationships are used for genuine temporary reasons.270 If none of the

exceptions applies, or if no justification exists for employing the employee

on a fixed-term basis instead of permanently, the employment relationship

converts into an indefinite employment relationship after the three-month

period. If an employer or a client terminates a fixed-term contract in order to

avoid the operation of this provision, it constitutes a dismissal.271

An employee who is "deemed to be the employee of the client"272 must be

treated "on the whole not less favourably" than the permanently appointed

employees working for the client, who perform the same or similar work,

unless a justifiable reason exists for treating him or her differently.273 A

justifiable reason includes reasons based on seniority, experience, or length

of service, merit, the quality or quantity of work performed, or any other

268 In University of Pretoria v CCMA 2012 33 ILJ 183 (LAC) Davies AJ held that s

1861(1)(b) was limited to instances where the employee expects a temporary renewal, and that because the employee in that case had a reasonable expectation of permanent employment the situation fell outside of the scope of the statutory unfair dismissal protection. Grogan describes the extension of s 186(1)(b) as also covering fixed-term employees having a reasonable expectation of being kept on indefinitely as a "direct legislative response" to this case. See Grogan Workplace Law 172 n 50.

269 Section 198B of the LRA. 270 Forere 2016 SA Merc LJ 375, 387, 398. 271 Grogan Workplace Law 44. 272 Section 198A(3)(b) of the LRA determines that after three months an employee, if s/he

has not been performing "temporary service" for a client, is "deemed" to be the employee of the client. The employee is also "deemed" to be employed on a permanent basis by the client. The deeming provision was applied in Mphirime and Value Logistics Ltd 2015 36 ILJ 2433 (BCA); Assign Services (Pty) Ltd and Krost Shelving & Racking (Pty) Ltd 2015 36 ILJ 2408 (CCMA); Assign Services (Pty) Ltd v CCMA 2015 11 BLLR 1160 (LC). Also see Grogan 2014 ELJ 3; Grogan 2015 ELJ 4; Van Eck 2013 De Jure 600, 606.

273 Section 198D(2) of the LRA.


criteria of a similar nature that are not prohibited by the Employment Equity

Act 55 of 1998.274

Whether or not the legislature has ousted the approach followed in Twoline

Trading 413 (Pty) Ltd t/a Skosana Contract Labour v Abram Mongatane275

that the contract between a TES and its client is the main agreement and

the contract between the TES and the employee can be made accessory

thereto is uncertain. The amendments that determine that employees in

tripartite relationships can hold the client responsible jointly and/or severally

does not clearly define the parameters of the liability of the respective

employer parties.276

In SATAWU obo Dube v Fidelity Supercare Cleaning Services Group (Pty)

Ltd,277 which was decided after the amendments to the LRA, Mosime AJ

held that automatic terminations of employment contracts are impermissible

as the LRA prohibits contractual devices having the effect of preventing an

employee from exercising rights under the LRA. He proceeded to rule that

any contractual provision, even if the contract had been voluntarily

274 Section 198D of the LRA. CCMA commissioners and bargaining council arbitrators

are, among other things, empowered by the provisions in s 198A and B to evaluate the reasons for fixing the term of appointment; to identify comparable full–time or standard employees and ensure that non-standard employees receive the same treatment and benefits; to declare the client to be the "deemed" employer; or determine if the employer's conduct was aimed at avoiding the deeming provision.

275 Twoline Trading 413 (Pty) Ltd t/a Skosana Contract Labour v Abram Mongatane 2014

JOL 31668 (LC) para 60. 276 Forere 2016 SA Merc LJ 380, 395. Before the amendments, s 198(2) of the LRA

determined that the TES was the employer of the employee assigned to a client. When

a person assigned to a client by a TES claimed that he or she had been unfairly

dismissed, his or her remedy was against the TES. However, it is not entirely clear

whether the new provision for joint and several liability also applies to unfair

dismissals. No clear allocation of duties is set in the legislation. See in this regard

Aletter and Van Eck 2016 SA Merc LJ 309. Grogan comments that s 198 regulates

liability only for breaches of the BCEA, breaches of bargaining council agreements or

sectoral determinations. Unfair dismissals and unfair labour practices are not

mentioned. Consequently, he asserts that as before the amendments, a dismissed

employee may institute action only against the TES as the employer. See in this regard

Grogan 2015 ELJ 4. However, a different view is proposed by Brassey in Assign

Services (Pty) Ltd v CCMA 2015 11 BLLR 1160 (LC): when terminating the services

of someone appointed to perform temporary services both the client and the TES must

comply with s 188 of the LRA. This would imply that, even if a TES must terminate its

employees' contracts because its client no longer wants or needs their services, the

TES must have a fair reason, and follow a fair procedure. The TES must, in either

event, face any potential unfair dismissal claims and the consequences if the dismissal

is ruled unfair. 277 SATAWU obo Dube v Fidelity Supercare Cleaning Services Group (Pty) Ltd 2015 36

ILJ 1923 (LC).


concluded, that either directly, or indirectly restricts or excludes the right not

to be unfairly dismissed, is invalid.278

Mosime AJ based his finding on the following. First, parties cannot contract

out of the unfair dismissal protection. This, the court said, is amplified by the

recent amendments to the LRA. He referred to the new definition of "fixed-

term contract",279 noting that the employee in casu was appointed on a

fixed-term contract. Then he applied section 198(4C) of the LRA, which

determines that employees employed by a TES cannot be employed on

terms and conditions that are not allowed in terms of the LRA. This finding

supports the tenet that the amendments to the LRA and the extension of the

rights applicable to fixed-term employees have become factors that are

considered by the court in determining whether a particular "automatic

termination" clause is valid and/or enforceable. In this case, instead of

finding that the automatic termination provision was valid but unenforceable

because the "automatic termination" clause was contrary to public policy,

the court ruled that the "automatic termination" clause was prohibited, and

declared it invalid.280 This approach clearly contradicts the principles that

were laid down in several other decisions.281 However, it also serves to

illustrate that the court has, since the coming into operation of the new

sections of the LRA, chosen to take a different, stricter stance when it comes

to deciding whether employers should be permitted to rely on "automatic

termination" clauses.

In terms of the new amendments, if a fixed-term employee has worked for

his or her employer continuously for longer than 24 months, he or she

subject to certain conditions282 would qualify for severance pay of one week

278 Sections 5 (2)(b), 5(4) of the LRA. 279 Section 198B (1) of the LRA. 280 SATAWU obo Dube v Fidelity Supercare Cleaning Services Group (Pty) Ltd 2015 36

ILJ 1923 (LC) para 44. 281 Refer to the discussion under 5. 282 There must not be a collective agreement to the contrary to which the employee is

bound. The fixed-term employee/s must have worked for the employer on a specific project for longer than 24 months (s 198B(10) of the LRA). He or she must not have rejected a reasonable offer of other suitable employment made by the employer, (s 198B(11) of the LRA) and the employee must earn below the prescribed earnings threshold (s 198B(2)(a) of the LRA). Employers employing fewer than ten employees or that employ more than 50 employees, but who have not yet been in business for two years are also excluded. This is so, unless the employer conducts more than one business, or if the business in which the affected fixed-term employee is working was formed by a division or dissolution of another business (s 198B(2)(b) of the LRA). In addition, a fixed-term employee who is engaged under contract that is regulated by other legislation, a sectoral determination, or a collective agreement is not covered by the new severance pay provision (s 198B(2)(b) of the LRA).


for every completed year of service.283 This severance pay is payable even

if the reason for the termination of work does not relate to the employer's

operational reasons. In other words, this payment is made in recognition of

long service.284 In the light of this new provision, it would be very difficult for

an employer to argue that a fixed-term employee that meets its eligibility

criteria is not entitled to severance pay when his or her service is terminated.

Even if the court finds that the employment relationship was terminated by

the operation of a valid "automatic termination" clause, this payment should

still be made to him or her as it is made in recognition of the length of service,

not to serve as severance pay for a dismissal for operational requirements

only.

Two amendments may affect the matter of the eligibility to unemployment

insurance and the nugatory effect that this used to have on employees' right

to claim in terms of section 186(1)(b) of the LRA: employers must now

provide employees with details of their employment, and renewals must be

affected in writing. Moreover, the extension of section 186(1)(b) to include

the situation where an employee reasonably expects to be retained by the

employer on an indefinite basis, and the requirement that employers treat

employees equitably in comparison with their permanent colleagues, may

serve to address this problem.

The LRA mandates CCMA commissioners and bargaining council

arbitrators to interpret and apply the new provisions.285 This extends

significantly the powers that commissioners and arbitrators have to

intervene in the contractual arrangements between employers and "non-

standard" employees. Some of the powers that are granted to arbitrators

under the new amendments actually require that at times they must make

awards that would inadvertently impose changes in the continued

contractual relationship between the employer and employee. For instance,

if it is found that a fixed-term employee is not after three months of

employment treated the same as permanently employed workers in the

workplace, the commissioner would have to remedy this. If a commissioner

were to find that a fixed-term employee who reasonably expected to be kept

on permanently in terms of section 186(1)(b) had been unfairly dismissed,

changes to the original contract would have to be ordered to ensure that the

employee's continued employment with the employer was on the same

283 Section 198B(10) of the LRA. 284 See the Memorandum of the Objects Labour Relations Bill, 2012 (Department of

Labour 2012 http://www.labour.gov.za/DOL/downloads/legislation/bills/proposed-amendment-bills/memoofobjectslra.pdf 26).

285 Section 198A-C of the LRA.


terms as that of other indefinitely appointed employees. In other words, in

order to protect the interests of these workers, who are now acknowledged

as being vulnerable in the legislation. CCMA commissioners and bargaining

council arbitrators are required to step into the contractual arena if the

circumstances require it.

The extension of the statutory protection of vulnerable employees generally

reflects judicial distaste for arrangements by which employers treat

temporary employees disparately, or in a way in which they can be

dispensed with without being subject to the unfair labour practices or unfair

dismissal provisions.286 The way in which the jurisprudence is developing

appears to be in keeping with the changing public policy.

However, the lack of defined public policy factors that must be applied in all

cases involving the automatic termination of fixed-term employment

contracts has serious negative implications as well. Whereas in one case

decided after the promulgation of the amendments the court applied the new

legislation applicable to fixed-term employees in the LRA,287 the LAC has

not done so in even more recent decisions.288

Moreover, what weight must be attached to different facets of the public

policy is unclear, and this lack of clarity has the potential to influence the

outcome of an investigation of the validity/enforceability of an "automatic

termination" clause drastically. For example, in Enforce Security Group v

Fikile the LC, relying on South African Post Office v Mampeule and

Mahlamu v CCMA, held that a contractual clause that infringes on the rights

conferred in terms of the LRA or Constitution is invalid. Despite the fact that

the employee may have been deemed to waive his or her rights, the waiver

would not be valid or enforceable. Based on this principle, which has been

applied similarly in several other cases discussed in this contribution, the

LC concluded that the employer should have followed the retrenchment

procedures in the dismissal for operational reasons.289 However, the lower

court's finding that the conduct constituted a dismissal was overturned on

appeal, because the LAC felt that too little attention had been paid to the

meaning and implication of the terms of the contract, and because the court

286 See, for instance, National Union of Metal Workers of South Africa v Abancedisi

Labour Services CC 2012 11 BLLR 1123 (LAC). 287 SATAWU obo Dube v Fidelity Supercare Cleaning Services Group (Pty) Ltd 2015 36

ILJ 1923 (LC). 288 Enforce Security Group v Fikile (DA24/15) 2017 ZALCD 2 (25 January 2017). 289 Enforce Security Group v Fikile (DA24/15) 2017 ZALCD 2 (25 January 2017) para 11.


below should have corrected an error made in the arbitration concerning the

nature of the contracts.290

9 Conclusion

At common law, it is recognised that the premature termination of fixed-term

contracts should be permitted in very limited cases only. However, there are

ways in which a contract of employment can terminate without the

termination's constituting a "dismissal" in terms of the LRA. Some of the

ways in which automatic terminations can be effected apply to fixed-term

employees in particular. Fixed-term employees, particularly those who are

lower-paid, are identified as a vulnerable group of workers in the LRA.

Important amendments have been made that affect the termination of the

employment of fixed-term employees. The protection offered by section

186(1)(b) has been extended to cover fixed-term employees having a

reasonable expectation of permanent continuance of their employment, and

it is a dismissal if a TES aims to avoid the operation of the deeming

provisions. In addition, fixed-term employment has been reserved for

instances of true temporary employment engagements and provisions have

been included to afford these employees additional job security. Moreover,

employers are required to treat fixed-term employees no less favourably

than their permanent colleagues, and their terms of engagement cannot be

made on terms that are not permitted in terms of the LRA.

The protection of fixed-term employees is not only of individual interest

between the two contracting parties in the employment relationship. The

public also has an interest in how jobs are preserved and in seeing to it that

employees who may not be able to take care of themselves are protected.

Individual employees cannot waive certain rights. In the light of the newly

introduced legislative provisions, it should be less conceivable that

employees will be able to rely upon and enforce "automatic termination"

clauses, as they are more likely to be perceived as contracting out of the

unfair dismissal protection, unemployment entitlements, the right to receive

notice of termination, and the statutory right to receive severance pay.

Courts appear, in general, to have become more scrupulous when

evaluating whether or not an "automatic termination" clause in a fixed-term

contract should be ruled as valid and enforceable. The courts consider

several factors when making this determination. Given the introduction of

290 Enforce Security Group v Fikile (DA24/15) 2017 ZALCD 2 (25 January 2017) paras

22, 24, 46.


the new legislation, these factors should include that the contract was

temporary, and that the LRA provides that the terms of the engagement

should not be contrary to the LRA. However, one of the negatives attached

to the fluidity of public policy is that it is not possible to cast in stone

principles to be applied by the courts in all cases, and this detracts from

legal certainty. It is unassailable in the absence of clear guidelines that are

consistently applied that different courts will consider different factors

important and place different weights on specific facets of public policy when

determining whether or not an "automatic termination" clause is valid and

should be enforced.

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List of Abbreviations

BCEA Basic Conditions of Employment Act 75 of 1995

CCMA Commission for Conciliation, Mediation and Arbitration

CLL Contemporary Labour Law

COSATU Congress of South African Trade Unions

EAT Employment Appeal Tribunal

ELJ Employment Law Journal

EPA Employment Protection (Consolidation) Act 1978

IJCLLIR International Journal of Comparative Labour Law and

Industrial Relations

ILJ Industrial Law Journal

ILO International Labour Organisation

LAC Labour Appeal Court

LC Labour Court

LDD Law, Democracy and Development

LRA Labour Relations Act 66 of 1995

NEDLAC National Economic Development and Labour Council

PELJ Potchefstroom Electronic Law Journal

SA Merc LJ South African Mercantile Law Journal

SCA Supreme Court of Appeal

TES Temporary employment service

UK United Kingdom

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